LOTES — Annual Report 2021

Nov 24, 2022

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Stock Code: 3533

Lotes Co., LTD

2021

Annual Report

Notice to readers

This English version annual report is a translation of the Chinese version. If there is any inconsistency or discrepancy between the English version and Chinese version, the Chinese version shall prevail for all intents and purposes.

Published on May 17, 2022 Enquiry on the annual report: http://mops.twse.com.tw

1. Information on the Company's spokesperson and acting spokesperson.

	Name	Title	Telephone Number		E-mail Address	E-mail Address
Spokesperson	Liu, Hsing-Hsia	Financial manager	(02)24331110		samliu@lotestech.com
Acting Spokesperson	Tsai, Ming-Jui	Sales Vice President	(02)24331110			ray@lotestech.com

1. The name, address, and telephone number of the Company’s headquarters and factories

Name	Address	Telephone Number
Headquarter	No. 15, Wuxun St., Anle Dist., Keelung City	(02)24331110
Factory	No. 15, Wuxun St., Anle Dist., Keelung City	(02)24331110

1. The name, address, website, and telephone number of the agency handling shares transfer Name: SinoPac Securities Corporation Stock Registration Division

2. Address: 3F., No. 17, Bo’ai Rd., Taipei City

Website: http://securities.sinopac.com/

Telephone Number: (02) 2381-6288

1. The name of the certified public accountant who duly audited the annual financial report for the most recent fiscal year, and the name, address and telephone:

2. Name of Accountants: Li, Fung-Hui, Chung, Tan-Tan

Name of Accounting Firm: KPMG Taiwan

Address: 68F., No. 7, Sec. 5, Xinyi Rd., Taipei City

Website: http://www.kpmg.com.tw Telephone Number: (02) 8101-6666

1. the name of any exchanges where the company’s securities are traded offshore, and the method by which to access information on said offshore securities: N/A

2. Company website: http://www.lotes.com.tw

Table of Contents

I.	Letters to Shareholders --------------------------------------------------------------------------------------	1
II.	Company Profile ----------------------------------------------------------------------------------------------	3
III.	Corporate Governance Report	5
	1. Organization ------------------------------------------------------------------------------------------------	5
	2. Information on Directors, Supervisors, President, Vice President, Associate President, Heads of departments and branches --------------------------------------------------------------------------------	7
	3. Remuneration of Directors, Supervisors, Presidents, and Vice Presidents -------------------------	16
	4. Corporate governance operations -----------------------------------------------------------------------	25
	5. Accountants’ Information ---------------------------------------------------------------------------------	47
	6. Transfer or pledge of shares by the company's directors, supervisors, managers and
	stockholders with more than 10% of the company's shares ---------------------------------------------	50
	7. Relationship among the Top Ten Shareholders --------------------------------------------------------	51
IV.	Capital Overview	52
	1. Capital and shares -----------------------------------------------------------------------------------------	52
	2. Issuance of corporate bonds ------------------------------------------------------------------------------	55
	3. Issuance of preferred shares ------------------------------------------------------------------------------	56
	4. Issuance of global depository receipts ------------------------------------------------------------------	56
	5. Employee subscription warrants -------------------------------------------------------------------------	56
	6. Restriction on issuning of new employee option ------------------------------------------------------	57
	7. Share issuance of merger company ---------------------------------------------------------------------	57
	8. Share issuance of merger company ---------------------------------------------------------------------	57
V.	Overview of Business Operations	58
	1. Description of the business -------------------------------------------------------------------------------	58
	2. Overview of market, production and sales -------------------------------------------------------------	62
	3. Employee information ------------------------------------------------------------------------------------	68
	4. Disbursements for environmental protection ----------------------------------------------------------	68
	5. Labor relations ---------------------------------------------------------------------------------------------	69
	6. Information Security Management ----------------------------------------------------------------------	69

	7. Important contracts ---------------------------------------------------------------------------------------- 70
VI.	Overview of Financial Status 71
	1. A condensed balance sheet and statement of comprehensive income for the last five years
	with the name of the accountant and his or her audit opinion ------------------------------------------ 71
	2. Five-year financial analysis ------------------------------------------------------------------------------ 74
	3. Audit Report of Audit Committee for the Financial Statements ------------------------------------- 77
	4. Financial Statements and Independent Auditor’s Report --------------------------------------------- 78
	5. Consolidated Financial Statements and Independent Auditor’s Report ---------------------------- 144
VII.	Review Analysis of Financial Position and Operating Performance and Risk Issues 210
	1. Financial position ------------------------------------------------------------------------------------------ 210
	2. Operating performance ----------------------------------------------------------------------------------- 211
	3. Cash flow --------------------------------------------------------------------------------------------------- 212
	4. The impact of major capital expenditures in the most recent year on financial operations
	------------------------------------------------------------------------------------------------------------------- 212
	5. The main reasons for the most recent annual reinvestment policy and profit or loss, improvement plans and investment plans for the coming year -----------------------------------------212
	6. Analyze and assess the following risks for the most recent year and up to the date of publication of the annual report ----------------------------------------------------------------------------213
	7. Other important matters ---------------------------------------------------------------------------------- 214
VIII.	Special Disclosure 215
	1. Related information of affiliates ------------------------------------------------------------------------- 215
	2. Private Placement Securities in the Most Recent Years ---------------------------------------------- 221
	3. The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years --- 221
	4. Other items of description which needs to be supplemented ---------------------------------------- 221
IX.	Any event that had a material impact on the rights of shareholders or the prices of securities provided in Clause 2, Paragraph 3, Article 36 of the Securities and Exchange Act occurred ------221

I. Letters to Shareholders

1. 2021 Report on business operations

(1) Letters to Shareholders

Consolidated revenue for 2021 was NT$21,391 million, a 23.71% increase over revenue of NT$17,291 million for 2020. Consolidated net income was NT$3,472 million, a 27.08% increase over net income of NT$2,732 million for 2020, translating into earnings per share of NT$33.32.

In 2021, the global economy continued to be affected by the epidemic of COVID-19, causing extreme uncertainty in the global economic outlook and impacting the operations of the Company's industry. However, due to the gradual increase in the conversion rate of new-generation server and desktop CPU platforms and the results of the Company's active investment in new products and new customer development, the Company was able to achieve stable revenue growth in 2021 and set a new revenue record since its establishment. In terms of profitability, although there was the continuous rise of raw material prices in global markets, the increase in the scale of operations, new product penetration and improved production efficiency made the Company's profitability in 2021 increased by 27.08% compared to 2020, and the earnings per share after tax reached a high level of NT$33.32.

• (2) Operating plan implementation results and profitability analysis

• a. Operating plan implementation results

		Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	Item	2021	2020	Increased (decreased) amount	Increased (decreased) proportion
	Operating revenues	21,391,916	17,291,332	4,100,584	23.71%
	Operating costs	12,834,611	10,361,137	2,473,474	23.87%
	Gross profit	8,557,305	6,930,195	1,627,110	23.47%
	Net income after tax for the period	3,472,201	2,732,361	739,840	27.08%

b. Financial income and expenditure and profitability analysis

	Item	Item	2021	2020
Profitability (%)	Return on total assets		15.29	15.44
	Return on total shareholders’ equity		22.87	21.58
	Percentage to the paid-in capital	Operatingincome	411.33	358.30
		Net income before tax	428.40	354.66
	Net profitmargin		16.23	15.80
	Earnings pershare aftertax		33.32	26.41

c. Research and development status

In order to continue to provide customers with high quality products, the Company continues to improve the level of technology and energy in the areas of design, process, quality control and testing, and continues to achieve high growth goals, and has spared no effort in the development of new products to develop small pitch, high density connectors. Recently, in order to meet the future market trend of high-speed connectors, the Company has been actively engaged in high-current and high-frequency connector analysis and development capabilities to meet market demand. In addition, in order to expand our product line and market size, we have successfully developed connectors for high-frequency servers, automobiles, high-speed transmission devices and the latest transmission interface Type-C, etc.

1. 2021 Operating plan and outlook

2. (1) Management plan

3. a. Management policy

4. 1) To strengthen market linkages between the three markets on both sides of the Strait and coordinate capacity allocation so as to fully grasp market changes and demand.

5. 2) To strengthen the research and development team, continuously develop new products and improve the technical level to enhance the company's core technical capabilities in order to build a competitive advantage.

6. 3) To integrate the Group's resources and improve production and management capabilities to reduce production costs and enhance operational efficiency.

7. b. Important marketing and production policies

8. 1) To strengthen customer relationship management to enhance competitive efficiency, and to actively maintain close relationships with major international manufacturers.

9. 2) To provide customers with diversified products and services, the company adopts a customer-oriented approach and stays close to market leading manufacturers.

10. 3) To improve the efficiency of factory management and the division of labor between domestic and overseas factories, and to strengthen the inventory management capability to effectively control production costs and enhance the

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production and sales mechanism.

(2) Outlook for the future

Looking into the future, the Company will continue to face a highly competitive market and a dynamic economic environment. However, in addition to strengthening close cooperation with customers, the Company will continue to develop and improve its existing products and adopt a diversified strategy to enhance market sensitivity by maintaining good cooperation with international professional manufacturers, in order to fully grasp the development trend of new products and research and develop niche products. The Company aims to enhance its competitive edge in the industry and to achieve its operating objectives smoothly, thereby continuously creating maximum value for shareholders.

Best wishes,

Chairperson: Chu, Te-Hsiang President: Ho, Te-Yu Accounting Manager: Liu, Hsing-Hsia

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II. Company Profile

1. Date of incorporation: August 23, 1986

2. Company history

1986	The Company was founded in Wugu Dist., New Taipei City; with total capital of 5 million New Taiwan Dollars; engaged in the manufacturing, processing and trading of various terminals and their finishedproducts.
1989	Being aware of the electronics industry’s future, the Company began to manufacture/design electronic connectors and other related electronicproducts.
1992	Moved to Dawulun Industrial Park,Keelungcity.
1997	ISO9002 certified;Certified and taken effect of UL certification in the sameyear.
1998	Capital increased by cash, total capital was twenty-five million New Taiwan Dollars (NTD25,000,000).
2002	ISO9001:2000 certified.
2003	Invested factoryin Guanghou-Lotes Guanghou Co.,Ltd。
2004	Guanghou factory-Lotes Guanghou Co., Ltd was certified and taken effect of ISO 14001. LOTES connectors received ASUS “Environmental Management System “certification. CPU Socket 478 received Intel certification. Invested factory in Suzhou-Lotes Suzhou Co., Ltd。 Suzhou factory-Lotes Suzhou Co., Ltd was certified and taken effect of ISO 9000. The Company increased capital by cash, increasing total capital to four hundred ninety-five million New Taiwan Dollars(NTD 495,000,000).
2005	Lotes Suzhou Co., Ltd was certified and taken effect of ISO 9001:2000. The Company converted surplus into capital, increasing total capital to five hundred twenty-three million and two hundred thousand New Taiwan Dollars(NTD 523,200,000)。
2006	The Company converted surplus into capital and increased capital by cash, increasing total capital to five hundred ninety-one million and six hundred sixty thousand New Taiwan Dollars (NTD 591, 660,000). Approved by Securities and Futures Bureau, Financial Supervision Commission of the Executive Yuan to pass public offering. Approved byTaipei Exchange to register as emergingstock.
2007	The Company converted capital reserves and surplus into capital, increasing total capital to six hundred thirty-eight million and two hundred thousand New Taiwan Dollars (NTD 638,200,000). Approved by Taiwan Stock Exchange to register as listed company. The Company increased capital by cash, increasing total capital to seven hundred eleven million and seven hundred fortythousand New Taiwan Dollars(NTD 711,740,000).
2008	The Company converted surplus into capital, increasing total capital to seven hundred sixty-two million three hundred twenty-seven thousand New Taiwan Dollars (NTD 762, 327,000). Received Intel’s Preferred Quality Supplier (PQS) award
2009	The Company converted employee stock option certificate to capital, increasing total capital to seven hundred seventy-one million and forty-one thousand New Taiwan Dollars (NTD 771,041,000).
2010	The Company increased capital by cash, increasing total capital to nine hundred thirty-one million and forty-one thousand New Taiwan Dollars(NTD931,041,000).
2011	The Company converted employee stock option certificate to capital, increasing total capital to nine hundred thirty-four million and seven hundred seventy-nine thousand New Taiwan Dollars(NTD 934,779,000).

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2012	The Company’s subsidiary, Lintes Technology, had successfully developed Thunderbolt high-speed active transmission cable series products. By passing Intel and Apple’s techconology qualification, Lintes Techonology became the second professional manufacturer receiving the Intel Thunderbolt technology certification and manfacture Thunderbolt cables.
2013	CPU Socket--LGA 2011Pin R0 socket received Intel certification. CPU Socket-- LGA 2011Pin R1 ILM & BP received Intel certification.
2014	Successfully developed HP Smart Socket ILM Joined USBIF to develop a new generation of high speed transmission device, USB Type C
2015	Developed Intel next generation server product, skt P PHLM Received Sanodenki ’s Quality Supplier award. Became qualified supplier for Samsung Mobile Communications business division.
2016	CPU Socket--LGA3674 PHLM for the next generation servers received Intel certification. Lotes Guanghou was certified AS9100C: Quality Management Standard for Aviation, Space,and Defense Industries.
2018	The Company’s subsidiary, Lintes Technology’s 40Gb Thunderbolt 3 passive 0.7M cable received Intel certification.
2019	The Company’s subsidiary, Lintes Technology was approved by Taipei Exchange to register as listed emerging stock company. The Company increased capital by cash, increasing total capital to one thousand thirty-one million and forty-one thousand New Taiwan Dollars(NTD 1,031,041,000).
2020	The Company’s subsidiary, Lintes Technology was approved by Taiwan Stock Exchange to register as listed company. The Company implemented the Enterprise Resource Management (ERP) system, SAP ERP, and went live on 1/7. DDR5 certified by DETEC Association. USB4.0 & Thunderbolt Jan4 certified by USB-IF Association.
2021	CPU Socket-Whitley Socket for the next generation servers received Intel certification.

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III. Corporate Governance Report

I. Organization

• (1) Organizational chart

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Board of
Directors
Auditor’s
Office
General
Manager
General Manager’s
Office
Management Dept. Administration Dept Finance Dept. Sales Dept. R&D Dept. Manufacturing Dept. QA Dept. IT Dept. Legal Affair Dept.
----- End of picture text -----

(2) Businesses operated by each major department:

Department	Functions
General Manager	1. By the resolution of the Board of Directors, is responsible to all shareholders. 2. Overall planning for the Company and its developing direction. 3. Determine organizational structure. 4. Approve and sign off the Company’s major decisions and contracts. 5. Draw up quality policies/quality goals.
General Manager's Office	1. Assist General Manager in the execution of the overall planning.
Auditing Office	1. Exam and evaluate the integrity, rationality and validity of the Company's internal control system.
Financial & Administrative Department	1. Manage recruitment operations, and personnel information and attendance 2. Plan and execute employee training. 3. Manage miscellaneous affairs. 4. Manage office equipment maintenance and logistics affairs. 5.Human resourcesmanagementfor foreignaffiliated companies.
Finance Department	1. Provide relevant financial and management statements for external users and internal managers 2. Plan and execute annual budget. 3. Raise,operate,and allocate funds.
Finance Department	4. Prepare and analyze daily accounting, tax and financial statements. 5. Reimburse the Company’s various expenses 6. Evaluate the Company’s business performance and perform cost analysis. 7. Raise and allocate funds for foreign affiliated companies.
Sales Department	1. Expand markets. 2. External product quotations, correspondence and customer reception. 3. Operate order receiving, modifying and invoicing. 4. Collaborate with relevant departments to ensure delivery. Consult with clients if delivering on time is unachievable. 5. Customer information organization and customer service.

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Department	Functions
Research & Development Department	1. Responsible for the design and execution of newly developed products or tooling. 2. Manage and communication design changes. 3. Confirm toolingmade.
Manufacturing Department	1. Production of plastic products: Manufacture products’ plastic parts, design and modify plastic injection tooling and jigs, maintain on-site equipment, and manage material. 2. Production of stamping products: Responsible for the manufacture of terminals, the design and modification of stamping dies and jigs, the maintenance of on-site equipment, and material management. 3. Responsible for leading supplier management: Procure and manage material, equipment and daily consumables; Production planning and control. 4. Stock management of stock materials, semi-finished products and finished product: Manage and optimize production efficiency and process capability. 5. Procurement on behalf of foreign affiliated companies.
Quality Control Department	1. Product quality system control 2. Correction and preventive measures for defective products. 3. Handle customer complaint. 4. Inspect purchased products, self-produced products, finished products and raw material. 5. Counsel suppliers, inspect and monitor the process of incoming materials, manufacturing and shipping.
IT Department	1. Maintenance of network system 2. Maintenance of software/hardware equipments 3. Maintenance of system 4.Planning and executionof informationsystem.
Legal & Intellectual Property Office	1. Patent affairs 2. Legal affairs 3. Intellectual property affairs
Business Management Department	1. Responsible for oversea production quality control, delivery business expansion, customer services, customer/supplier relationship maintenance and improvement. 2. Operationplanningand analysis ofgroupaffiliated businesses.

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II. Information on Directors, Supervisors, President, Vice President, Associate President, Heads of departments and branches

(1). Information on Directors and Supervisors

																	April 19,2022	April 19,2022	April 19,2022
Title	Nationality / Country of Origin	Name	Gender Age	Date elected	Term (year)	First Election Date	Shareholding when Elected		Current Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience (Education)	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship			Remarks
							Shares	%	Shares	%	Share s	%	Share s	%			Title	Name	Relation
Chairman	R.O.C.	Jiaming Investment Co., Ltd. Representa tive: Chu, Te-Hsiang	Male 51-60	July 16, 2021	3	93.10	10,040,037	9.70%	9,797,037	9.23%	0	0	0	0	Taishan Senior High School/ Mechanical Department; Lotes Co., Ltd./Chairperson	Lotes Co., Ltd./Chairperson Jiaming Investment Co., Ltd./Chairperson Jinling Investment Co., Ltd./Supervisor LOTES INVESTMENT LTD./Chairperson Lotes Suzhou Co., Ltd./Chairperson Lotes Guangzhou Co., Ltd./Vice Chairperson Jiayu Investment Co., Ltd./Chairperson Ememe Robot Co., Ltd./Chairperson Lintes Technology Co., Ltd./Chairperson Dechuan Investment Co., Ltd./Chairperson	Associate President's office	Chu Chen, Yi-Hui	Spouse
																	President	Ho, Te-Yu	Brother
Director	R.O.C.	Jiaming Investment Co., Ltd. Representa tive: Ho, Te-Yu	Male 51-60	July 16, 2021	3	October, 2004	10,040,037	9.70%	9,797,037	9.23%	0	0	0	0	Chung-Pu Junior High School Northern Occupational Training Council/Department of Die Molding Panyu Deyi Ltd./President	Lotes Co., Ltd./President Jinling Investment Co., Ltd./Chairperson Dunlin Investment Co., Ltd./Chairperson LOTES INVESTMENT LTD./Director Lotes Guangzhou Co., Ltd./Chairperson Lotes Guangzhou Dezhi Co., Ltd./Chairperson Tsongkha Technology (Shenzhen ) Co., Ltd./Director Lotes Suzhou Co., Ltd./Vice Chairperson Lotes Hengnan Co., Ltd./Chairperson Lotes Hengnan Dezhi Co., Ltd./Chairperson Lintes Technology Co., Ltd./Director Jiayu Investment Co., Ltd./Director Lotes Zhongshan Co., Ltd./Director	Chairperso n	Chu, Te-Hsiang	Brothers
Director	R.O.C.	Hsieh, Chia-Ying	Male 41-50	July 16, 2021	3	June, 2013	0	0	0	0	0	0	0	0	National Taiwan University/Master of Business Administration National Taiwan University/B.S. in Electrical Engineering Realtek Semiconductor Corp./Executive Assistant to the President Communicator Venture Management Inc./Vice President MIS Joint International Co., Ltd./Vice President	Leltek Inc./Director Total Fortune Capital Limited/Executive Director Sunplus Innovation Technology Inc./Independent Director Tyntek Corporation/Independent Director	None	None	None

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Director	R.O.C.	Chu, Chien-Chu ng	Male 41-50	July 16, 2021	3	July 16, 2021	0	0	0	0	0	0	0	0	National Taiwan University/PhD in Electrical Engineering Mega Venture Capital Co., Ltd./Investment Review Committee Member Department of Electronic and Computer Engineering, National Taiwan University of Science and Technology/Adjunct Associate Professor TWSE/Listed Company Review Committee Member Department of Business Administration, NTU/Adjunt Practice Teacher Texas Instruments Taiwan Ltd./Senior Application Engineer NTU School of Professional Education and Continuing Studies/Adjunct Chair Professor	Ansforce Inc./Founder and CEO Graduate Institute of Technology, Innovation & Intellectual Property Management, National Chengchi University/Adjunct Assistant Professor	None	None	None
Independe nt Director	R.O.C.	Wang, Jen-Chun	Female 41-50	July 16, 2021	3	July 16, 2021	0	0	0	0	0	0	0	0	University of Pennsylvania/PhD in Law Clerk Division for the Grand Justices at the Judicial Yuan/Assistant to the Grand Justices	Tsar and Tsai Law Firm/Partner	None	None	None
Independe nt Director	R.O.C.	Chiang, I-Cheng	Male 51-60	July 16, 2021	3	July 16, 2021	0	0	0	0	0	0	0	0	University of Delaware/PhD in Mechanical Engineering Taiwan Aerospace Corp./Senior Engineer Taiwan High Speed Rail Corporation/Project Manager Department of Mechanical Engineering, Chinese Culture University/Assistant Professor, Associate Professor, Professor and Department Director Chinese Culture University/Universit y Affairs Development Committee Member	Department of Mechanical Engineering, Chinese Culture University/Professor	None	None	None

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Drexel Deashine CPA Firm/CPA
University/MBA High-Tek Harness Enterprise Co.,
Ltd./Independent Director
Ding Shuo Certified Nanoplus Limited (Cayman) Taiwan
Public Accountants Branch/Independent Director
Taipei Branch/Chief Innovation Incubation Center, National
CPA Taipei University of
Ding Shuo Certified Technology/Counselor
Public Academia-Industry Collaboration and
Accountants/Partner Technology Licensing Center, National
CPA Taiwan Ocean University/Counselor
Department of
International
Business, National
Taipei University of
Business /Adjunct
Lecturer
Public Service
Pension Fund
nt Director Independe R.O.C. Chang-HsiWu, u Female 41-50 July 16, 2021 3 July 16, 2021 0 0 0 0 0 0 0 0 Management Board/ Clerk of Department of Foreign Affairs
National Taxation
Bureau of the
Southern Area
Minxiong
Office/Clerk of Tax
Affairs
Department of
Accounting and
Information
Technology, National
Chung Cheng
University/Adjunct
Lecturer
Deloitte
Taiwan/Deputy
Group Leader
KPMG
Taiwan/Auditor
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Director and Supervisor are corporate shareholders' representatives; the major shareholders of the corporate shareholders are: April 19, 2022

	are:	are:	April 19,2022	April 19,2022	April 19,2022
	Name of Corporate Shareholder		Major Shareholders of Corporate Sharholder
	Jiaming Investment Co., Ltd.		Chu, Te-Hsiang (24.44%), Chu-Chen, Yi-Hui (28.88%), Chu, Pei-Hsuan (15.56), Chu, Yen-Ni (15.56%), Chu, Ching-Fu (15.56%)
	Expertise andindependence oftheDirectorand Supervisor:
Term Name		Professional qualifications and experiences		Compliance with independence circumstances	Number of other public companies that the person also served as independent directors
Chairperson Chu, Te-Hsiang		With more than 30 years of experiences in the R&D and manufacturing of connectors, and business administration. No circumstances specified in Article 30 of the CompanyAct.			No
Director Ho, Te-Yu		With more than 30 years of experiences in the R&D and manufacturing of connectors, and business administration. No circumstances specified in Article 30 of the CompanyAct.			No
Director Hsieh, Chia-Ying		With the profession and experiences in engineering and business administration. Worked as an independent director of the Company. Currently serves as a director of Leltek Inc, the Executive Director Total Fortune Capital Limited, and an independent director of Sunplus Innovation Technology Inc. No circumstances specified in Article 30 of the Company Act.			2
Director Chu, Chien-Chung		With the profession and experiences in engineering and business administration. Currently serves as the Founder and CEO of Ansforce Inc., and the Adjunct Assistant Professor, Graduate Institute of Technology, Innovation & Intellectual Property Management, National Chengchi University. No circumstances specified in Article 30 of the Company Act.			No
Independent Director Wang, Jen-Chun		With the educational attainment and profession of law. A lawyer and patent attorney in R.O.C. and a lawyer in New York, U.S. Currently serves as a Partner at Tsar and Tsai Law Firm. No circumstances specified in Article 30 of the Company Act.		Being independent as an independent director. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, is not a director, supervisor or employee of the Company or any of its affiliates. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not hold any share of the Company and is not a director, supervisor or employee of company that has certain relationship with the Company. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not receive any remuneration for business, legal, financial and accounting services provided for the Company or its affiliates in the last two years.	No

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Independent Director Chiang, I-Cheng	With the educational attainment and profession of mechanical engineering. Currently serves as a professor at the Department of Mechanical Engineering, Chinese Culture University. Serves as the covenor of the Remuneration Committee of the Company. No circumstances specified in Article 30 of the Company Act.	Being independent as an independent director. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, is not a director, supervisor or employee of the Company or any of its affiliates. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not hold any share of the Company and is not a director, supervisor or employee of company that has certain relationship with the Company. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not receive any remuneration for business, legal, financial and accounting services provided for the Company or its affiliates in the last two years.	No
Wu, Chang-Hsiu	With the educational attainment and profession of accounting. A CPA in R.O.C., a CPA, agent ad litem for tax affairs, patent and trademark affairs, a corporate sustainability manager, Accredited in Business Valuation in Pennsylvania, U.S. Currently serves as a CPA at Deashine CPA Firm. Serves as the covenor of the Audit Committee of the Company. No circumstances specified in Article 30 of the Company Act.	Being independent as an independent director. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, is not a director, supervisor or employee of the Company or any of its affiliates. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not hold any share of the Company and is not a director, supervisor or employee of company that has certain relationship with the Company. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not receive any remuneration for business, legal, financial and accounting services provided for the Company or its affiliates in the last two years.	2

Board Diversity and Independence:

1. Board Diversity:

In accordance with Rule 20 of the Company's Code of Corporate Governance Practices, the composition of the Board of Directors shall take into account diversity, except that the number of directors who are also managers of the Company shall not exceed one-third of the total number of directors, and that the Company shall develop an appropriate diversity approach with regard to its operation, business model and development needs, which shall include but not be limited to the following two major criteria.

• (1) Basic qualifications and values: gender, age, nationality and culture, etc.

• (2) Professional knowledge and skills: professional background (e.g. law, accounting, industry, finance, marketing or technology), professional skills and industry experience, etc.

Board members should generally possess the knowledge, skills and qualities necessary to carry out their duties. To achieve the desired objectives of corporate governance, the Board as a whole should possess the following competencies.

• (1) Ability to make operational judgments.

• (2) Ability to perform accounting and financial analysis.

• (3) Ability to conduct business administration.

• (4) Ability to conduct crisis management.

• (5) Knowledge of the industry.

• (6) International market perspective.

• (7) Ability to lead.

• (8) Ability to make policy decisions.

The composition of the Board of Directors should take into account the diversity of its membership and develop an appropriate diversity approach in relation to its operations, business model and development needs. The Company will re-elect its directors and independent directors and establish an audit committee at the 2021 Annual General Meeting. The current seven Board members, three of whom are independent, possess the knowledge, skills and qualities necessary to carry out their duties and have the necessary experience and expertise in accounting, legal, financial, commercial or corporate business respectively.

The Company also places emphasis on gender parity in the composition of the Board, with a target of 25% or more female directors, and currently has 7 directors, including 2 female directors, representing 29%.

The diversity of the Board is shown in the table below: The Board conducts regular performance reviews annually and recognises the diversity and suitability of its members.

[Background of Diversification]

Basic Information

Background Experience

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Item Name	Gender	Employee of the Company	Age	Age	Accounting	Law	Finance	Technology	Professional (Professor/ lawyer/ CPA)	Business Administrat ion	R&D, Manufaturi ng	Investing
			41-50	51-60
Chairperson Chu,Te-Hsiang	Male	◎		◎				◎		◎	◎
Director Ho, Te-Yu	Male	◎		◎				◎		◎	◎
Director Hsieh, Chia-Ying	Male		◎				◎	◎		◎		◎
Director Chu, Chien-Chung	Male		◎					◎	◎	◎		◎
Independent Director Wang, Jen-Chun	Female		◎			◎			◎	◎
Independent Director Chiang, I-Cheng	Male			◎				◎	◎	◎	◎
Independent Director Wu, Chang-Hsiu	Female		◎		◎				◎	◎

[Diversity Core Items]

[Diversity Core	Items]
Item Name				Diversity Core	Items
	Operational judgment	Accounting and financial analysis	Business administration	Crisis management	Knowledge of the industry	International market perspective	Ability to lead	Ability to make policy decisions
Chairperson Chu, Te-Hsiang	V		V	V	V	V	V	V
Director Ho, Te-Yu	V		V	V	V	V	V	V
Director Hsieh, Chia-Ying	V	V	V	V	V	V	V	V
Director Chu, Chien-Chung	V	V	V	V	V	V	V	V
Independent Director Wang, Jen-Chun	V		V	V	V	V	V	V
Independent Director Chiang, I-Cheng	V		V	V	V	V	V	V
Independent Director Wu, Chang-Hsiu	V	V	V	V	V	V	V	V

2.Independence of the Board.

• (1) The Company has 3 independent directors, accounting for 42.86% of the total 7 seats on the Board. The independent directors are independent in the following circumstances.

• None of them, including but not limited to himself/herself, his/her spouse, his/her second degree of kinship, etc., is a director, supervisor or employee of the Company or its affiliated companies.

• Neither the person, nor the spouse, nor a relative within the second degree of consanguinity, etc., holds shares in the Company (or uses the name of another person).

• None of them is a director, supervisor or employee of a company with a specific relationship with the Company (as stipulated in Article 3, Paragraph 1, Paragraphs 5 to 8 of the Regulations Governing the Establishment and Compliance of Independent Directors of Public Companies).

• In the last two years, the Company or its affiliates have not provided business, legal, financial or accounting services for which the Company was paid.

• (2) There are no spousal relationships among the Directors; Chu, Te-Hsiang, Chairman, and Ho, Te-Yu, Director, are brothers in two degrees of consanguinity. In accordance with Article 26-3, Paragraph 3 of the Securities

12

and Exchange Act, no more than half of the Board of Directors of the Company shall be spouses or second degree relatives of the Directors.

• (3) he Company's Board of Directors was re-elected in 2021 and the Audit Committee replaced the function of the Supervisors and there are no more Supervisors. Therefore, there shall be no relationship between the supervisors or between the supervisors and the directors as described in Article 26-3, Paragraph 4 of the Securities and Exchange Act, and at least one of them shall be a spouse or a relative within two degrees of consanguinity.

13

(2) Information on President, Vice President, Assistant Vice President, Heads of Departments and Branches

April 19, 2022

													April 19,2022	April 19,2022	April 19,2022
Title	Natio nality / Coun try of Origi n	Name	Gender	Date elected	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience (Education)	Other Position	Managers who are spouse or consanguineous within two degrees			Remark s
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
President	R.O. C.	Ho, Te-Yu	Male	August 23, 1986	454,108	0.43%	0	0.00%	15,956,237	15.03%	Northern Occupational Training Council/Department of Die Molding; Lotes Co., Ltd./President Panyu Deyi Ltd./President	Jinling Investment Co., Ltd./Chairperson Dunlin Investment Co., Ltd./Chairperson LOTES INVESTMENT LTD./Director Lotes Guangzhou Co., Ltd./Chairperson Lotes Guangzhou Dezhi Co., Ltd/Chairperson Tsongkha Technology (Shenzhen ) Co., Ltd./Director Lotes Suzhou Co., Ltd./Vice Chairperson Lotes Hengnan Co., Ltd./Chairperson Lotes Hengnan Dezhi Co., Ltd./Chairperson Lintes Technology Co., Ltd./Director Jiayu Investment Co., Ltd./Director Lotes Zhongshan Co., Ltd./Director	Chairpe rson and R&D Director	Chu, Te-Hsian g	Brother
R&D Director	R.O. C.	Chu, Te-Hsiang	Male	November 8, 2017	15,926	0.01%	5,061	0.00%	12,748,425	12.01%	Taishan Senior High School/ Mechanical Department; Lotes Co., Ltd./Chairperson	Lotes Co., Ltd./Chairperson Jiaming Investment Co., Ltd./Chairperson Jinling Investment Co., Ltd./Supervisor LOTES INVESTMENT LTD./Chairperson Lotes Suzhou Co., Ltd./Chairperson Lotes Guangzhou Co., Ltd./Vice Chairperson Jiayu Investment Co., Ltd./Chairperson Ememe Robot Co., Ltd./Chairperson Lintes Technology Co., Ltd./Chairperson Dechuan Investment Co., Ltd./Chairperson	Associat e Presiden t's office	Chu-Che n, Yi-Hui	Spouse
													Presiden t	Ho, Te-Yu	Brother
President Office Assistant deputy manager	R.O. C.	Chu-Chen, Yi-Hui	Female	November 8, 2017	5,061	0.00%	15,926	0.01%	0	0	Chinese Culture University/ Department of Political Science Lotes Co., Ltd./ Assistant deputy manager	Jiaming Investment Ltd./Supervisor	Chairpe rson and R&D Director	Chu, Te-Hsian g	Spouse
Department of Sales Senior deputy manager	R.O. C.	Tsai, Ming-Jui	Male	November 15, 2007	5,000	0.00%	1,000	0.00%	0	0	Ming Chuan University/Graduate Institute of International Business Lotes Suzhou Co., Ltd. /Vice President	LOTES EU GmbH /Director	No	No	No
Department of Finance Manager	R.O. C.	Liu, Hsing-Hsia	Male	June 1, 2006	0	0.00%	0	0	0	0	Tamkang University/Department of Accounting TCK Technology Co., Ltd./ Financial Manager	Ememe Robot Co., Ltd. /Director	No	No	No
Department of Finance Deputy Manager	R.O. C.	Liang, Shih-Yi	Female	June 1, 2006	0	0.00%	0	0	0	0	Tamkang University/Department of Accounting MAEDEN INTERNATIONAL LIMITED/Chief Accountant	None	No	No	No
Business Management Deputy Manager	R.O. C.	Kung, Yung-Sheng	Male	May 1, 2007	6,000	0.01%	0	0	0	0	National Taiwan University/Master of Mechanical Engineering Nan Juen International Co., Ltd./Engineering Manager	None	No	No	No
Business Management Assistant Manager	R.O. C.	Lin, Ching-Hao	Male	July 11, 2008	509	0.00%	0	0	0	0	San-Chung Vocational High School/Department of Mechanical Engineering STARLINK ELECTRONICS CORP./Plant Manager	None	No	No	No
Business Management Assistant Manager	R.O. C.	Lin, Tsun-Te	Male	January 1, 2010	0	0.00%	0	0	0	0	Tamkang University/Master of Information Management FOUND FAIR PLASTIC INDUSTRIAL CO., LTD./Information Manager	None	No	No	No

14

Business Management Auditing Supervisor	R.O. C.	Wang, Hsi-Hung	Male	October 27, 2011	0	0.00%	0	0	0	0	National Taiwan University/Master of Business Administration DaChan Food (Asia) Limited/Auditing Office Supervisor	None	No	No	No
Business Management Assistant Manager	R.O. C.	Lin, Yao-Ching	Male	January 21, 2016	0	0.00%	0	0	0	0	St. John's University/ Department of Electronic Engineering Foxconn Technology Group/Quality Controll Supervisor	None	No	No	No
Sales Deputy Manager	R.O. C.	Li, Cheng-Wen	Male	January 21, 2016	2,000	0.00%	0	0	0	0	Vanung University/Department of Electronic Engineering Lotes Co., Ltd./Sales B Manager	None	No	No	No
Business Management Assistant Manager	R.O. C.	Wu, Yi-Chen	Male	December 5, 2016	3,000	0.00%	1,476	0.00%	0	0	Chinese Culture University/ Department of Political Science Lotes Co., Ltd./Sales A Manager	None	No	No	No
Business Management Sales Assistant Manager	R.O. C.	Lin, Ko-Lun	Male	December 5, 2016	0	0.00%	0	0	0	0	National Taipei University of Technology/Department of Industrial Engineering and Management EMBA LOTES Guangzhou Co., Ltd./Sales Manager	None	No	No	No
Management Department QR Associate Manager	R.O. C.	LIU, CHIN-HONG	Male	April 11, 2018	4,000	0.00%	0	0	0	0	National Taiwan University of Science and Technology/ FIT Vice Manager	None	No	No	No
Management Department Associate Manager	R.O. C.	HO, CHI-HSIANG	Male	April 1, 2020	2,000	0.00%	0	0	0	0	University of Michigan - Ann Arbor/MS FOXCONN/Engineer Touch Micro-system / Engineer	None	No	No	No

15

3, Remuneration of Presidents and Vice Presidents:

1. Remuneration of Directors (including Independent Directors)

2021 ； Unit: NT$ thousands

Title	Name				Direct	ors' remuner	ation			Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)			Sstaff recei	ve relevant r	emuneration	emuneration			A, B, C, D, E, F and G as a percentage of net income after tax	A, B, C, D, E, F and G as a percentage of net income after tax	Remuner ation from non-subsi diary reinvestm ents or parent companie s
		Remunera	tion (A)	Severance	Pay (B)	Bonuse Allowan	s and ces (C)	Profit Sharing- Employee Bonus (D)				Salaries, bonuses, special allowances, etc (E)		Retirement P	ension (F)	Remuneration o		f employees (G)
		The Company	Conso- lidated	The Company	Conso- lidated	The Company	Consoli- dated	The Company	Consoli- dated	The Company	Consoli- dated	The Company	Consoli- dated	The Company	Consoli- dated	The Company		Conso	lidated	The Company	Consoli- dated
																Cash	Share	Cash	Share
Chairman	Jiaming Investment Ltd.Rept.: Chu, Te-Hsiang	0	0	0	0	3241	3241	45	45	0.09%	0.09%	5,951	5,951	279	279	9,843	0	9,843	0	0.55%	0.55%	0
Director	Jiaming Investment Ltd.Rept.: Ho, Te-Yu
Director	Tsai, Ming-Jui (Note 1)
Director	JIN, CHAN-MING (Note 1)
Director	Hsieh, Chia-Ying (Note 2)
Director	Chu, Chien-Chung (Note 2)

16

Title	Name	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)	Sstaff receive relevant r	Sstaff receive relevant r	Sstaff receive relevant r	Sstaff receive relevant r	emuneration	emuneration	emuneration	emuneration	A, B, C, D, E, F and G as a percentage of net income after tax	A, B, C, D, E, F and G as a percentage of net income after tax	Remuner ation from non-subsi diary reinvestm ents or parent companie s
		Remuneration (A)		Severance Pay (B)		Bonuses and Allowances (C)		Profit Sharing- Employee Bonus (D)				Salaries, bonuses, special allowances, etc (E)		Retirement Pension (F)		Remuneration of employees (G)
		The Company	Conso- lidated	The Company	Conso- lidated	The Company	Consoli- dated	The Company	Consoli- dated	The Company	Consoli- dated	The Company	Consoli- dated	The Company	Consoli- dated	The Company		Consolidated		The Company	Consoli- dated
																Cash	Share	Cash	Share
Independent Director	Hsieh, Chia-Ying(Note 3)	187	187	0	0	730	730	138	138	0.03%	0.03%	0	0	0	0	0	0	0	0	0.03%	0.03%	0
Independent Director	HU, REI-CHIN(Note 3)
Independent Director	Wang, Jen-Chun(Note 4)
Independent Director	Chiang, I-Cheng(Note 4)
Independent Director	Wu, Chang-Hsiu(Note 4)
1.Please describe the policy, system, criteria and structure for the remuneration of independent directors, and the relevance of the amount of remuneration to the responsibilities, risks and time commitment involved: remuneration of the Company's directors and independent directors shall not exceed 3% of the Company's profits and the Board of Directors is authorized to determine the remuneration of the directors and Company's operations. 2.Except as disclosed in the table above, remuneration received by the directors of the Company for services rendered to all companies included in the financial statements (e.g., as consultants to non-employees) in th																In accordance with Article 19 of the Company's Articles of Association, the independent directors in accordance with their level of involvement in the e most recent year: None.

Note 1: Reelected on Jul. 16, 2021.

Note 2: Reelected on Jul. 16, 2021. Hsieh, Chia-Ying assume the position of Director. Note 3: Reelected on Jul. 16, 2021. Hsieh, Chia-Ying assume the position of Director. Note 4: Reelected on Jul. 16, 2021.

17

Remuneration Schedule

		RemunerationSchedule	RemunerationSchedule
Range of Remuneration		Name of Directors
	Total of	(A+B+C+D)	Total of (A+B+C+D+E+F+G)
	The Company	Companies in the consolidated financial statements	The Company	Companies in the consolidated financial statements
Below 1,000,000	JIN, CHAN-MING, Hsieh, Chia-Ying, HU, REI-CHIN, Tsai, Ming-Jui, Chu, Chien-Chung, Wang, Jen-Chun, Chiang, I-Cheng, Wu, Chang-Hsiu	JIN, CHAN-MING, Hsieh, Chia-Ying, HU, REI-CHIN, Tsai, Ming-Jui, Chu, Chien-Chung, Wang, Jen-Chun, Chiang, I-Cheng, Wu, Chang-Hsiu	JIN, CHAN-MING, Hsieh, Chia-Ying, HU, REI-CHIN, Chu, Chien-Chung, Wang, Jen-Chun, Chiang, I-Cheng, Wu, Chang-Hsiu	JIN, CHAN-MING, Hsieh, Chia-Ying, HU, REI-CHIN, Chu, Chien-Chung, Wang, Jen-Chun, Chiang, I-Cheng, Wu, Chang-Hsiu
1,000,000～2,000,000	Chu, Te-Hsiang, Ho, Te-Yu	Chu, Te-Hsiang, Ho, Te-Yu
2,000,000～3,500,000
3,500,000～5,000,000			Chu, Te-Hsiang	Chu, Te-Hsiang
5,000,000～10,000,000			Ho, Te-Yu, Tsai, Ming-Jui	Ho, Te-Yu, Tsai, Ming-Jui
10,000,000～15,000,000
15,000,000～30,000,000
30,000,000～50,000,000
50,000,000～100,000,000
Over 100,000,000
Total	10	10	10	10

18

(2) Remuneration of supervisors 2021 ； Unit: NT$ thousands

Title	Name			Remuneration of Supervisors	Remuneration of Supervisors			Ratio of total compensation (A+B+C) to net income (%)	Ratio of total compensation (A+B+C) to net income (%)	Remuneration from non-subsidiary reinvestments or parent companies
		Remuneration (A)		Consideration (B)		Business Implementation Expenses (C)
		The company	Consolidated	The company	Consolidated	The company	Consolidated	The company	Consolidated
Supervisor	Jin Ling Investment: CHANG, KUN-YAO(Note 1)	0	0	507	507	27	27	0.02%	0.02%	0
Supervisor	YANG, WEN-MING(Note 1)
Supervisor	CHENG, MING-SONG(Note 1)

Note 1: The Company no longer has a Supervisor after the Board of Directors fully re-elected the Directors to replace the Supervisor function with an Audit Committee on July 16, 2021

Table of remuneration ranges

	Table of remuneration ranges	Table of remuneration ranges
Remuneration pay range for each Supervisor of the Company	Name of Supervisors
	Total of (A+B+C)
	The Company	Companies in the consolidated financial statements
Below 1,000,000	CHANG, KUN-YAO, YANG, WEN-MING, CHENG,MING-SONG	CHANG, KUN-YAO, YANG, WEN-MING, CHENG,MING-SONG
1,000,000～2,000,000
2,000,000～3,500,000
3,500,000～5,000,000
5,000,000～10,000,000
10,000,000～15,000,000
15,000,000～30,000,000
30,000,000～50,000,000
50,000,000～100,000,000
Over 100,000,000
Total	3	3

19

(3) Remuneration of Presidents and Vice Presidents: 2021 ； Unit: NT$ thousands

Title	Title	Name	Remunera	tion (A)	Severanc	e Pay (B)	Bonuses and Al	lowances (C)	Profit Sharing- Employee Bonus	Profit Sharing- Employee Bonus	Profit Sharing- Employee Bonus	Profit Sharing- Employee Bonus	(D)	Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)	Remuneration from non-subsidiar y reinvestments or parent companies
			The Company	Consolidated	The Company	Consolidated	The Company	Consolidated	The Company			Conso	lidated	The Company	Consolidated
									Cash		Stock	Cash	Stock
President		Ho, Te-Yu	32,402	32,402	1,576	1,576	0	0	29,709		0	29,709	0	1.81%	1.81%	無
R&D Chief		Chu,Te-Hsiang
Vice President		Lu, Chih-Cheng(Note 1)
Vice President		Kung, Yung-Sheng
Associate Manager		Chu-Chen, Yi-Hui
Vice President		Tsai, Ming-Jui
Vice President		Li, Cheng-Wen
Associate Manager		Lin, Ching-Hao
Associate Manager		Lin, Tsun-Te
Associate Manager		Lin, Yao-Ching
Associate Manager		Wu, Yi-Chen
Associate Manager		Lin, Ko-Lun
Associate Manager		HO, CHI-HSIANG
Associate Manager		LIU, CHI-HONG
Associate Manager		WU, YU-WEI(Note 2)
Note Note Note	1：Vice President Lu, Chih-Cheng retired on 2021.9.30. 2：Associate Manager WU, YU-WEI was terminated on 2021.8.23. 3：The remuneration of the Manager shall be approved by the Remuneration Committee and submitted to the Board of Directors for approval after the "Regulations Governing Salaries" and the scope of authority and responsibility of the position as well as the degree of contribution to the operational RemunerationSchedule
	Range of Remuneration				Name of Presidents and Vice Presidents The Company Companies in the consolidated financial statements
										Companies in the consolidated financial statements
	Below 1,000,000
	1,000,000～2,000,000				Lu, Chih-Cheng, WU, YU-WEI					Lu, Chih-Cheng, WU, YU-WEI
	2,000,000～3,500,000				Lin, Tsun-Te, Lin, Yao-Ching, LIU, CHI-HONG					Lin, Tsun-Te, Lin, Yao-Ching, LIU, CHI-HONG
	3,500,000～5,000,000				Chu, Te-Hsiang, Ho, Te-Yu, Chu-Chen, Yi-Hui, Wu, Yi-Chen, Lin, Ching-Hao, HO, CHI-HSIANG					Chu, Te-Hsiang, Ho, Te-Yu, Chu-Chen, Yi-Hui, Wu, Yi-Chen, Lin, Ching-Hao, HO, CHI-HSIANG
	5,000,000～10,000,000				Kung, Yung-Sheng, Tsai, Ming-Jui, Li, Cheng-Wen, Lin, Ko-Lun					Kung, Yung-Sheng, Tsai, Ming-Jui, Li, Cheng-Wen, Lin, Ko-Lun

20

10,000,000～15,000,000
15,000,000～30,000,000
30,000,000～50,000,000
50,000,000～100,000,000
Over 100,000,000
Total	15	15

21

(4) Name of Managers and circumstances of distribution of employees' remuneration

2021 ； Unit: NT$ thousands

	Title	Name	Shares	Cash (Note 1)	Total	Ratio of Total Amount to Net Income (%)
Managerial officers	President	Ho, Te-Yu	0	33,018	33,018	0.93%
	R&D Chief	Chu, Te-Hsiang
	Management Department Vice President	Kung, Yung-Sheng
	Associate Manager	Chu-Chen, Yi-Hui
	Sales Div. VP	Tsai, Ming-Jui
	Management Department Associate Manager	Lin, Ching-Hao
	Management Department Associate Manager	Lin, Tsun-Te
	Management Department Associate Manager	Lin, Yao-Ching
	Management Department Associate Manager	Lin, Ko-Lun
	Management Department Associate Manager	HO, CHI-HSIANG
	Management Department Associate Manager	LIU, CHI-HONG
	Sales Div.一部 Associate Manager	Wu, Yi-Chen
	Sales Div.二部 Associate Manager	Li, Cheng-Wen
	Financing Dept. Manager	Liu, Hsing-Hsia
	Audit Director	Wang, Hsi-Hung
	Financing Dept. Vice Manager	Liang, Shih-Yi

Note 1: The 2021 employees remuneration is based on the proportion of 2020 employee remuneration.

(5) Compare and contrast an analysis of the total remuneration paid to the Company's Directors, Supervisors, Presidents and Vice Presidents as a percentage of net income after tax for the most recent two years by the Company and all companies in the Consolidated Statements, respectively, and describe the policies, criteria and combinations of remuneration paid, the procedures used to establish remuneration, and the correlation with operating performance and future risks.

Unit: NT$ thousands

The Company 2020 2021

22

The Company	Total remuneration	90,980	84,635
	Proportion of netprofit after tax	3.32%	2.44%
Consolidated	Total remuneration	90,980	84,635
	Proportion of netprofit after tax	3.32%	2.44%

The remuneration of the Directors and Supervisors, including travel expenses and remuneration for the distribution of earnings, is paid in accordance with the Company's Articles of Incorporation, and the remuneration of the Presidents and Vice Presidents is paid in accordance with the Company's approved principles for the payment of seniority. 4. Corporate governance operations

(1). Operations of the Board of Directors The Board met nine times in 2021(A, July 16, 2021 three times before the Directors were re-elected and six times after the Directors were re-elected) and the attendance of the Directors was as follows.

Title	Name	Attendance in Person B	By Proxy	Attendance Rate (%)(B/A)	Remarks
Chairperson	Jia Ming INC. Rept.: Chu, Te-Hsiang	9	0	100%
Director	Jia Ming INC. Rept.: Ho, Te-Yu	9	0	100%
Director	Tsai, Ming-Jui	3	0	100%	July 16, 2021, termination of office following re-election of directors by the shareholders’ meeting
Director	JIN, CHAN-MING	3	0	100%
Director	Hsieh, Chia-Ying	6	0	100%	July 16, 2021 ,termination of office following re-election of directors by the shareholders’ meeting
Director	Chu, Chien-Chung	5	0	83%
Independent Director	Hsieh, Chia-Ying	3	0	100%	July 16, 2021, termination of office following re-election of directors by the shareholders’ meeting
Independent Director	HU, REI-CHIN	2	0	67%
Independent Director	Wang, Jen-Chun	5	0	100%	July 16, 2021 ,termination of office following re-election of directors by the shareholders’ meeting
Independent Director	Chiang, I-Cheng	6	0	83%
Independent Director	Wu, Chang-Hsiu	6	0	100%
Other matters to be recorded. 1. The operation of the board of directors' meeting shall state the date, period, content of the motion, opinions of all independent directors and the Company's handling of the opinions of the independent directors if any of the following circumstances apply. (1)The matters listed in Article 14-3 of the Securities and Exchange Act. (2) Other than the matters listed above, any other matters resolved by the Board of Directors at a meeting of the Board of Directors at which the independent directors objected to or reserved their opinions and for which records or written statements are available. 2. The recusal of a director from the implementation of an interest motion shall include the name of the director, the content of the motion, the reasons for the recusal and the circumstances of the participation in the vote. 3. Listed companies should disclose information on the periodicity and duration of self- (or peer) evaluation by the board of directors, the scope, manner and content of the evaluation, and fill in Schedule 2(2) on the implementation of the board evaluation. 4. An assessment of the current and most recent year's objectives for enhancing the functions of the board of directors (e.g. establishingan audit committee,enhancinginformation transparency,etc.)and their implementation.

(2) Information on the operation of the Audit Committee

Information on the operation of the Audit Committee

23

The Audit Committee met 6 times (A) in the most recent year and the attendance of the independent

directors was as follows

Title	Name	Attendance in Person B	By Proxy	Attendance Rate (%)(B/A)	Remarks
Independent a	Wang, Jen-Chun	5	0	83.33%	Elected on 2021.07.26
Independent b	Chiang, I-Cheng	6	0	100%	Elected on 2021.07.26
Independent c	Wu, Chang-Hsiu	6	0	100%	Elected on 2021.07.26
Other matters to be recorded. 1. The operation of the Audit Committee shall include the date and period of the Audit Committee meeting, the content of the resolution, the content of the objections, reservations or material recommendations of the independent directors, the results of the Audit Committee's resolution and the Company's handling of the Audit Committee's opinion if any of the following circumstances apply (1)The matters listed in Article 14-5 of the Securities and Exchange Act. (2)Matters other than those listed above which have not been approved by the Audit Committee and which have been approved by at least two-thirds of all directors. 2. The recusal of an independent director from the implementation of an interest motion shall include the name of the independent director, the content of the motion, the reasons for the recusal and the circumstances of the participation in the vote. 3.Communication between the independent directors and the internal Audit Director and the accountant (including the major issues, manner and results of communication regarding the Company's financial and business conditions).

(3 Supervisory participation in the operation of the Board

The Board met 3 times in 2021 (A) with the following supervisors in attendance.

Title	Name	Attendance in Person B	By Proxy	Attendance Rate (%)(B/A)	Remarks
Supervisor	JingLingINC.:CHANG, KUN-YAO	3	0	100%	July 16, 2021, reelection
Supervisor	YANG, WEN-MING	3	0	100%
Supervisor	CHENG, MING-SONG	3	0	100%

24

• (4) Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed

Companies”

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Y	N	Abstract Illustration
1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?	ˇ		The Code of Corporate Governance was approved by the Board of Directors and is posted on the Company's website and the Market Observation Post System.	None
2. Shareholding structure & shareholders’ rights (1) Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure? (2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares? (3) Does the company establish and execute the risk management and firewall system within its conglomerate structure? (4) Does the company establish internal rules against insiders trading with undisclosed information?	ˇ ˇ ˇ ˇ		(1) The Company has an internal spokesperson, acting spokesperson, exclusive personnel and email address to handle shareholder proposals or disputes in accordance with the procedures. (2) The company has access to a list of the company's major shareholders and their ultimate controllers, which is regularly disclosed in accordance with the law and regulations. For a list of the relevant major shareholders, see page 41 of this Annual Report. (3) The Company establishes appropriate risk control mechanisms and firewalls in accordance with internal regulations such as control operations of subsidiaries, endorsement and guarantee methods, lending of funds to others, and criteria for acquisition or disposal of assets. All business dealings with affiliates are treated as independent third parties and unconventional transactions are prohibited. (4) The Company has a "Ethical Corporate Management Best Practice Principles", "Procedures for Handling Material Inside Information", and a "Guidelines for the Adoption of Codes of Ethical Conduct" to prohibit insiders from using undisclosed market information to purchase and sell marketable securities for improper gain.	None
3.Composition and Responsibilities of the Board of Directors (1) Does the Board have a diversity policy, specific management objectives and	ˇ		(1) The Company has established the "Code of Corporate Governance Practices" in accordance with the law, and Article 20 stipulates that the composition of the Board of Directors shall take into account diversity. In addition to the	The Company has no plans to establish a functional committee other than a remuneration committee. The Company has established the

25

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Y	N	Abstract Illustration
implementation? (2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee? (3) Does the company establish a standard to measure the performance of the Board, and implement it annually,and to report the result to the Board?	ˇ	ˇ	fact that the number of directors who are also managers of the Company should not exceed one-third of the seats of the Board of Directors, the Company shall formulate an appropriate diversity policy with respect to its own operation, business model and development needs, which shall include but not be limited to the following two major criteria. Basic qualifications and values: gender, age, nationality, and culture, etc. Professional knowledge and skills: professional background (e.g., law, accounting, industry, finance, marketing or technology), professional skills and industry experience, etc. Board members should generally possess the knowledge, skills and qualities necessary to perform their duties. In order to achieve the desired goals of corporate governance, the Board of Directors as a whole should possess the following competencies: a. Operational judgment. b. Accounting and financial analysis ability. c. Management skills. d. Crisis management ability. e. Industry knowledge. f. International market perspective. g. Leadership skills. h. Decision-making ability. The Company re-elected its directors in 2021. The current term (10th) has seven directors, all of whom are R.O.C., five of whom are male and two are female, including three independent directors. The directors come from a variety of professional backgrounds or fields of work, including accountants, lawyers, university professors and engineering, finance and operations management. They have the knowledge, skills and qualities required to carry out their duties and responsibilities, which	Board of Directors' performance evaluation method and will conduct annual performance evaluation on a regular basis starting in 2020 and will submit the results of the performance evaluation to the Board of Directors.

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Y	N	Abstract Illustration
(4) Does the company regularly evaluate the independence of CPAs?	ˇ		enable them to form the Board of Directors of the Company. (2) In addition to the Remuneration Committee, the Company re-elected the members of the Board of Directors and established an Audit Committee in 2021 to replace the Supervisory Committee. There are no plans to establish any other functional committees. (3) The Company has established a performance appraisal system for the Board of Directors and has been conducting regular performance appraisals and reporting the results of these appraisals to the Board of Directors on an annual basis since 2020. (4) The Company periodically evaluates the independence of its certified public accountants by making reference to the evaluation criteria set forth in The Bulletin of Norm of Professional Ethics for Certified Public Accountant of the Republic of China No. 10 "Integrity, Objectivity and Independence", and follows the regulations of the competent authorities to periodically adjust the length of a certified public accountant's license.

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Evaluation Item	Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Y	N	Abstract Illustration
4. Are TWSE/GTSM Listed Companies staffed with suitable and appropriate number of corporate governance personneland designated corporate governance officers to be responsible for corporate governance related matters (including, but not limited to, providing directors, supervisors with information necessary for the execution of business,assisting directors, supervisors in complying with lawsand regulations, conducting board and shareholder meeting related matters in accordance with the law, preparing minutes of board and shareholder meetings, etc.)?		ˇ		The Company's Board of Directors appointed Liu Xingxia, Finance Manager, to also serve as Head of Corporate Governance on August 11, 2020, providing directors and supervisors with information necessary for the execution of their business, handling matters related to the meetings of the Board of Directors and shareholders in accordance with the law, registering companies and registering changes, and preparing minutes of the meetings of the Board of Directors and shareholders,and other related matters.	None
5.	Does the company establish a communication channel and build a designated section on its website for stakeholders(including but not limited to shareholders, employees, customers,and suppliers), as well as handle all the issues they care for in terms of corporate social responsibilities?	ˇ		The Company has appropriate communication channels with its customers, suppliers, correspondent banks, employees, investors and other relevant stakeholders. A special section of our stakeholders' website has been set up in FY2015 as a response to stakeholders' concerns on important CSR issues.	None
6.	Does the company appoint a professional shareholder service agency to deal with shareholder affairs?	ˇ		The Company currently appoints the Stock Agency Department of SinoPac Securities to handle the relevant shareholders' affairs.	None
7.	Information Disclosure Does the company have a corporate website to disclose both financial standings and the status of corporate governance? Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)? Does the Company announce and report its annual financial report within two months of the end of the fiscal year, and announce and report its first, second and third quarter financial reports and operations for each month well in advance of the required deadline?	ˇ ˇ	ˇ	(1) The Company's website has disclosed information about the Company's profile, business and investor areas and corporate governance, and designated a person to be responsible for disclosing financial, business and corporate governance information about the Company on the MOPS. (2) The Company has a exclusive personnel responsible for the collection and disclosure of company information, and has a spokesperson and acting spokesperson in accordance with the regulations, and holds regular and irregular corporate briefing sessions, and regularly publishes operational and financial information in both English and Chinese to enhance the transparency of company information. (3) The Company has not announced and reported its annual financial report within two months of the end of the fiscal year. However, all of them were announced well in advance of the required deadlines and reported the first,second and	None
(1) (2) (3)

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Y	N	Abstract Illustration
			third quarterly financial reports and operations for each month.
8. Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors )?	ˇ		1. Employee rights: The Company protects the legitimate rights and interests of its employees in accordance with the Labor Standards Law. 2. Investor relations: The Company's website has set up an investor section for investors to learn more about the Company's investor-related information, and a spokesperson, acting spokesperson and shareholder affairs units are set up to deal with issues such as shareholder proposals or disputes. 3. Rights of interested parties: The Company respects and protects the legal rights and interests of its interested parties. 4. Directors' and supervisors' continuing education: Company directors and supervisors attend continuing education courses in finance, business, etc., as required. 5. The implementation of the directors' recusal of interest motion: The directors of the Company adhere to the principle of a high degree of self-discipline and are not allowed to vote on board meetings when they have an interest in a matter. 6. The company insured US$3 million in liability insurance for directors, supervisors and managers in 2020. 7. Implementation status of customer policy: The Company has a Quality Assurance Department and a Customer Support Department to provide transparent and effective after-sales services and customer complaints handling.	None
9.Please explain the improvements which have been made in accordance with the results of the Corporate Governance Evaluation System released by the Corporate Governance Center, Taiwan Stock Exchange, and provide the priority enhancement measures. In order to continue to strengthen corporate governance, the Company will make the following improvements in accordance with the evaluation index: The Company improved its corporate governance rating from 36% to 50% of the previous year to 21% to 35% of the previous year, with the followingimprovements in accordance with the assessment indicators. 2021 Criteria Improvement Does the company not have a government agency or a single legal entity and its subsidiaries occupying at least one-third of the board of directors? The Company's 9th Board of Directors consisted of 6 directors and 2 corporate directors. 7 directors were re-elected at the 2021 Annual General Meeting and 2 corporate directors, representing less than one-third of the total number of directors.

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	Evaluation Item				Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Y	N		Abstract Illustration
	Is the number of directors who are employees of the Company, its parent, child or sister company less than one-third of the total number of directors?				Of the six directors of the ninth session of the Board of Directors of the Company, two are corporate directors and one is a natural person. seven directors were re-elected at the 2021 Annual General Meeting of Shareholders and none of the natural person directors are employees of the Company, its parent, subsidiaries or sister companies, while two of the corporate directors are employees of the Company, accounting for less than one-third of the total number of seats.
	Does the company have an audit committee that meets the requirements?				The Company elected three independent directors at the 2021 Annual General Meeting of Shareholders and established an Audit Committee in compliance with the requirements. The annual report of the Company and the Company's website disclose the annual work focus and operation of the Audit Committee.
	Does the company have a corporate governance officer in charge of corporate governance-related matters, and does he/she explain on the company's website and in the annual report the terms of reference, business execution priorities for theyear,and the status of training?				The Company has disclosed the communication between the independent directors and the internal Audit Director, Accountant (e.g. the manner, issues and results of communication regarding the Company's financial reports and financial operations)on the Company's website.

(5) Where the Company has a remuneration committee, it shall disclose its composition, duties and operations.

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1.Composition of the Remuneration Committee

1.Composition of the Remuneration Committee

On July 26, 2021, the Company's Board of Directors approved the appointment of three members of the Compensation Committee, whose terms of office shall commence upon the appointment of the three members of the Compensation Committee by the Board of Directors and end on July 25, 2024, the same date as the term of office of the current Board of Directors, and shall operate in accordance with the "Compensation Committee Organization Regulations" established by the Company.

The membership of the Compensation Committee is set out in the table below.

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Qualification ID (Note 1) Name	Qualification ID (Note 1) Name	Qualification (Note 2)	Independence (Note 3)	Number of members of remuneration committees of other public companies
Convener	Chiang, I-Cheng	Mechanical Engineering Professional Learning Experience Department of Mechanical Engineering, Chinese Culture UniversityProfessor。 Convener of Remuneration Committee No circumstances specified in Article 30 of the Company Act.	An independent director and meets the criteria for independence, including but not limited to not being a director, supervisor or employee of the Company or its affiliated companies, and not being a spouse, second degree relative, etc. not holding a number of shares in the Company; not being a director, supervisor or servant of a company with which the Company has a specified relationship.	None
Independent Director	Wang, Jen-Chun	Law Professional Experience R.O.C.Lawyer, Patent Attorney and United States Attorney for the State of New York Tsar and Tsai Law FirmPartner。 No circumstances specified in Article 30 of the Company Act.	An independent director and meets the criteria for independence, including but not limited to not being a director, supervisor or employee of the Company or its affiliated companies, and not being a spouse, second degree relative, etc. not holding a number of shares in the Company; not being a director, supervisor or servant of a company with which the Company has a specified relationship.	None
Independent Director	Wu, Chang-Hsiu	Background in Accounting Studies R.O.C.CPA Pennsylvania accountants, tax litigation agents, patent attorneys, corporate sustainability managers, corporate valuers Deashine CPA Firm/CPA。 Convener of Audit Committee No circumstances specified in Article 30 of the CompanyAct.	An independent director and meets the criteria for independence, including but not limited to not being a director, supervisor or employee of the Company or its affiliated companies, and not being a spouse, second degree relative, etc. not holding a number of shares in the Company; not being a director, supervisor or servant of a company with which the Company has a specified relationship.	2

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2.Responsibilities of the Remuneration Committee

• The Committee shall, with the attention of the good manager, faithfully perform the following functions and submit the recommendations to the Board for discussion:

• (1) To establish and regularly review the policies, systems, standards and structures for performance evaluation and remuneration of directors, supervisors and managers.

• (2) To regularly evaluate and set remuneration for the directors, supervisors and managers.

3. Operation of the Remuneration Committee

• (1) The Company's Remuneration Committee consists of three members.

• (2) Current term of office: From Aug. 3, 2021 to Jul. 25, 2024, the 2021 Remuneration Committee met 2 times (A) and was attended by the following members:

Title	Name	Attendance in Person(B)	By Proxy	Attendance Rate (%) (Ｂ/Ａ)(Note)	Remarks
Convener	Chiang,I-Cheng	3	0	100%	Term: 110.8.3~113.7.25
Committee Member	Wang, Jen-Chun	3	0	100%	Term: 110.8.3~113.7.25
Committee Member	Wu, Chang-Hsiu	3	0	100%	Term: 110.8.3~113.7.25
Other mentionable items: 1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified) 2. Resolutions of the remuneration committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified

(3) The resolution of 2021 Remuneration Committee

Time Content Resolution and The Company’s Response

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2021.8.3	(1) To elect the convenor of the 5th Committee.	All members present agreed that the motion be approved as presented to the Board of Directors of the Company for resolution
2021.8.27	(1) To determine the distribution of the 2021 annual cash capital increase for employees and the amount of new shares to be issued to the Manager's employees.	All members present agreed that the motion be approved as presented to the Board of Directors of the Company for resolution
2021.12.16	(1) To review the payment of compensation to employees of the Company's managers for 2020. (2) To review the payment of year-end bonuses to the Manager for 2021.	All members present agreed that the motion be approved as presented to the Board of Directors of the Company for resolution

(6)Implementation of sustainable development and how and why it differs from the Code of Practice on Sustainable Development.

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
1. Has the company established a governance structure to promote sustainable development and set up a dedicated (part-time) unit to promote sustainable development, which is delegated by the Board of Directors to senior management and supervised by the Board of Directors?		ˇ	The Company has not established a governance structure to promote sustainable development and has a dedicated (part-time) unit to promote sustainable development.	The Company has not yet established a governance structure to promote sustainable development, and the establishment of a dedicated (part-time) unit to promote sustainable development will be assessed in the future depending on actual needs.
2. Does the Company conduct risk assessments on environmental, social and corporate governance issues related to the Company's operations and formulate relevant risk management policies or strategies in accordance with the materiality principle? (Note 3)		ˇ	(3)The Company does not yet have a dedicated (part-time) unit to promote corporate social responsibility.	The Company has not yet established a governance structure to promote sustainable development, and the establishment of a dedicated (part-time) unit to promote sustainable development will be assessed in the future depending

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
				on actual needs.
3. Environmental issues (1) Does the company establish proper environmental management systems based on the characteristics of their industries? (2) Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment? (3) Does the Company assess the current and future potential risks and opportunities of climate changes for the business and take measures to address climate related issues? (4) Has the Company compiled statistics on greenhouse gas emissions, water consumption, and total weight of waste in the past two years, and formulated policies on energy conservation, carbon reduction, greenhouse gas reduction, water use reduction, or other waste management?	ˇ ˇ ˇ ˇ		(1)The company has established an environmental management policy and our production plant is ISO14001 certified. (2)We adjust the temperature of our offices and warehouses according to the seasons in order to save energy and electricity, and we have introduced the ISO 14064 (GHG Greenhouse Gas) system certification. In addition, the Company has established a waste disposal plan to classify waste and entrust it to a local government-approved waste disposal institution for removal or recycling to reduce the impact of hazardous substances on the environment. (3)The Company has not yet assessed the potential risks and opportunities of climate change on its business now and in the future, but the Company has placed emphasis on the control of exhaust and waste water emissions to reduce their impact on climate change. (4)In the past two years, the Company's Guangzhou and Suzhou plants have increased their hydroelectricity and carbon dioxide emissions due to the increase in production capacity. We have also taken active measures to save energy and reduce carbon emissions by installing solar power generation facilities in our plants and dormitories to achieve a noise-free and pollution-free environment and to reduce emissions of haze, carbon dioxide, sulphur dioxide, carbon dust and nitrogen oxides from coal-firedpowergeneration,which is conducive	None

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Evaluation Item			Implementation Status	Implementation Status	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
			to energysavingand carbon reduction.
				Water consumption (t)	Electricity consumption (Kwh)	Greenhouse gas emissions (tonnes CO2 equivalent/year)	Other waste (tonnes)
			2020	359,769	44,520,671	36,298	7,781
			2021	539,154	64,001,760	158,047	10,516
4. Social issues (1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (2) Does the Company establish and implement reasonable employee benefits (including compensation, vacation and other benefits) and appropriately reflect operating performance or results in employee compensation? Are reasonable employee benefits measures (including compensation, leave and other benefits, etc.) in place and appropriately reflected in employee compensation?	ˇ ˇ		(1)The Company recognises and adheres to international human rights conventions including the United Nations Universal Declaration of Human Rights, the International Labour Organisation Convention and supports the United Nations Framework for Protection, Respect and Remedy: Business and Human Rights and its Guiding Principles. We actively comply with human rights and labour rights legislation in all our locations, the Responsible Business Alliance Code of Conduct (RBA) and the requirements of our customers, and have established policies on management systems, working hours, wages, anti-discrimination and harassment, gender equality at work...etc. to ensure that our commitments are met. In addition to explaining the Company's policy and position to employees through announcements, events, literature, meetings, etc., the Company also educates employees on the importance of human rights protection and labour rights and related information through various channels, such as trainingfor new employees and					None None

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(3) Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?	ˇ		training for current employees. (2) The Company has established relevant employee welfare measures and reflected its operating performance in the employee bonus in accordance with the Company's Articles of Association. 1.Employee bonus: The bonus will be distributed according to the company's operation and individual performance as an incentive. 2.Year-end bonuses, gifts (or presents) for the three festivals. 3.Labour insurance and health insurance. 4.Leave system in accordance with the Labour Standards Law. 5.Monthly pension in accordance with the law. 6.Nursing room available. 7.The Welfare Committee is authorized to provide birthday gifts, wedding gifts, childbirth gifts, funeral benefits, etc. to employees. 8.The Welfare Committee is authorized to provide birthday gifts, wedding gifts, childbirth gifts, funeral benefits, etc. to employees. (3)The Company attaches great importance to the safety and health of its employees in the workplace, and the relevant protective measures and their implementation are as follows. (1)The Company has established management measures for occupational safety and health, prevention and treatment of occupational hazards, and various environmental protection measures such as waste storage management, in order to protect the safety of employees and avoid environmental pollution. (2)All items that mayhave an impact on the

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(4) Does the company provide its employees with career development and training sessions? (5) Does the Company comply with relevant regulations and international standards on customer health and safety, customer privacy, marketing and labeling of its products and services, and has it formulated relevant policies and complaint procedures to protect consumer rights? (6) Does the Company have a supplier management policy that requires suppliers to comply with relevant regulations on environmental protection, occupational safety and health, or human rights in the workplace, and how is it implemented?	ˇ ˇ ˇ		environment and safety are prepared on a daily basis, and we are able to respond immediately in the event of a disaster. An emergency response team has been set up to establish the duties and procedures of the organisation and its staff. (3)In order to provide a safe working environment, prevent the occurrence of occupational disasters and protect the safety and health of workers, the Company has established a safety and health code of practice and management regulations in accordance with the Occupational Safety and Health Act and its implementing regulations and the management requirements of OHSAS 18000. (4) In order to ensure the safety and health of all employees and non-employees working in the Company's workplace, the Company shall comply with the Code of Practice and the Management Regulations. (4)To ensure the safety of our employees in the workplace, all entrances and exits of our company are equipped with access control devices and main entrances and exits are equipped with security surveillance devices to ensure the safety of our employees. Our electrical, mechanical, lift and fire-fighting equipment are regularly inspected and maintained in accordance with the regulations or equipment usage rules to ensure their safety at all times. (5)To hold disaster prevention drills every six months to enhance staff awareness of fire prevention, so that they can take precautionary measures and take the correct safetymeasures

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
			immediately in the event of an incident. (6)To conduct regular staff health checks, testing of drinking water quality, and workplace health promotion to maintain the health of staff in the workplace. (7)In addition to health insurance for all employees, the Company also provides group accident insurance to protect the rights and interests of employees. (4)The Company has established an annual training plan according to each function and level, and arranged internal and external training or OJT (On Job Training) to enable employees to maximize their performance in their respective positions, so that the Company and individuals can develop and grow together. (5)The Company has established a "Customer Complaint Handling Operation Procedure". The marketing and labelling of our products are in accordance with relevant laws and international standards. (6)The Company has established the "Supplier Selection Management System" and requires all suppliers to provide products that comply with international environmental regulations, and has established relevant regulations in the contract. We also require our suppliers to have a sound management structure in terms of personnel and environmental organizations.
5. Does the company make reference to internationally accepted standards or guidelines for thepreparation of reports,such asperpetual	ˇ		The Company prepares a Corporate Social Responsibility (Sustainability) Report each year and discloses relevant non-financial information about the	None

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
reports, which disclose non-financial information about the company? Has a third party assurance or assurance opinion been obtained on the previously disclosed report?			Company. 2020 CSR reports were prepared in accordance with GRI (Global Reporting Initiative) standards and were validated by a third party verifier. The 2021 sustainability report is also being prepared in line with GRI standards and arrangements will be made to obtain thirdpartyvalidation.
6. If the Company has its own CSR Best Practice Principles in accordance with the "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies", please explain the differences between them: Although the Company does not have a CSR Best Practice Principles at the moment, its implementation is consistent with its spirit and there are no significant differences. The Companywill implement them in the future accordingto the actual needs or regulations of the law.
7. Other important information to help understand the implementation of sustainable development. The Company's plants in Taiwan and China continue to focus on the needs of the local community  In Taiwan: Sponsored the North Cross Walk for the physically challenged (NT$350,000), donated to the low-income households of Keelung City Government (NT$160,000), donated to the low-income households of Keelung City An-Le District (NT$200,000), sponsored the meal together for the elderly of Keelung City Zhonglun Volunteer Service Association (NT$40,000), and responded to the Baptist Church of Light and Resurrection's initiative to co-sponsor the Hope Primary School in India (NT$100,000).  In mainland China, we have established the "Donation and Subsidy Scheme for Needy Students" and allocated over RMB1 million from 2010 to 2021 to subsidise more than 30 needy students to complete their studies. We have combined government resources to provide long-term support to the disadvantagedgroups,activelyorganised staff toparticipate in communityactivities and donated materials and funds to orphanages.

1. If the Company has its own CSR Best Practice Principles in accordance with the "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies", please explain the differences between them:

2. Although the Company does not have a CSR Best Practice Principles at the moment, its implementation is consistent with its spirit and there are no

3. significant differences. The Company will implement them in the future according to the actual needs or regulations of the law.

4. In Taiwan: Sponsored the North Cross Walk for the physically challenged (NT$350,000), donated to the low-income households of Keelung City Government (NT$160,000), donated to the low-income households of Keelung City An-Le District (NT$200,000), sponsored the meal together for the elderly of Keelung City Zhonglun Volunteer Service Association (NT$40,000), and responded to the Baptist Church of Light and Resurrection's initiative to co-sponsor the Hope Primary School in India (NT$100,000).

(7) The Company's performance and measures to ethical corporate management.

	Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Implementation Status	(Note 1)	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Yes	No		Abstract Illustration
1. Establishment of ethical corporate management policies and programs (1) Does the Company have an ethical corporate management policy that has been approved by the Board of Directors and expresses its policies and practices on ethical corporate management in its regulations and external documents, as well as the commitment of the Board of Directors and senior management to actively implement the corporate management policy? (2) Has the Company established an assessment mechanism for the risk of unethical conduct,and regularlyanalyzed and evaluated		V ˇ		(1) The Company has established the "Ethical Corporate Management Best Practice Principles", which are based on the business philosophy of honesty, transparency and accountability, and has formulated policies based on ethical integrity, and established good corporate governance and risk control mechanisms to create a sustainable business environment, which are disclosed on the Company's website in 2020.			Follow the Company's corporate management principles. Follow the Company's corporate managementprinciples.

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		Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	ImplementationStatus	(Note 1)	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” andReasons
			Yes	No		Abstract Illustration
(3)	the business activities in the scope of business with a higher risk of unethical conduct, and formulated a plan to prevent unethical conduct, covering at least the preventive measures under Article 7, paragraph 2 of "Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies"? Does the Company have defined operating procedures, conduct guidelines, disciplinary and complaint systems for non-compliance, and periodically review and correct the foreclosure program in its unethical conduct prevention program?		V		(2) The Company has procedures and conduct guidelines for preventing unethical conduct, and will provide guidance to employees through internal mailings and conduct guidance sessions for directors and supervisors through external instructors. (3) The Company's dedicated unit shall hold an annual internal promotion and arrange for the chairman, president or senior management to convey the importance of integrity to directors, employees and appointees. The Company shall incorporate integrity management into employee performance appraisal and human resources policies, and establish a clear and effective system of rewards, penalties and grievances. The Company shall dismiss or terminate the employment of the Company's employees in accordance with relevant laws and regulations or in accordance with the Company's personnel policy in the event of a significant breach of integrity. The Company shall disclose on the Company's internal website the title, name, date of violation, content of the violation, and the circumstances under which the violation was handled.
2. (1) (2) (3) (4)	Fulfill operations integrity policy Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts? Has the company established a special (part-time) unit under the Board of Directors to promote corporate integrity management, and regularly (at least once a year) reports to the Board of Directors on its integrity management policies and plans to prevent dishonest practices and monitor their implementation? Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? Hasthe Company established an effective accounting system and internal control system for the implementation of ethical corporate management, and has the internal audit unitdrawn up an audit plan based on the assessment of the risk of unethical conduct, in order to audit compliance with the plan for preventing		V V V	V	(1) The Company assesses the legality and integrity of the transactions between companies with which it has business dealings before proceeding with subsequent transactions. A ethical conduct clause is also included in the signed commercial contract and is executed after inspection by the legal unit. (2) The Company has designated the Management Department as a dedicated unit to promote corporate integrity management. No material breaches of integrity were identified during 2021 and a report on the implementation of the Company's integrity policy was reported by the Board of Directors on March 21 2022. (3) The Company establishes and publishes an internal independent whistleblower or statement mailbox hr@lotestech.com and a hotline on the Company's website and intranet site, or commissions other external independent organizations toprovide a whistleblower			(1) Follow the Company's corporate management principles. (2) Follow the Company's corporate management principles. (3) Follow the Company's corporate management principles.

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		Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	ImplementationStatus	(Note 1)	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” andReasons
			Yes	No		Abstract Illustration
(5)	unethical conduct,or has it engaged an accountant to perform the audit? Does the company regularly hold internal and external educational trainings on operational integrity?		V		mailbox or hotline for use by internal and external personnel of the Company. (4) The Company has established "Procedures and Conduct Guidelines for Integrity Management" as the basis for compliance with the Company's internal control system, but has not yet established an audit plan for this purpose. (5) The Company does not regularly conduct internal training on ethical corporate management, but from time to time, it participates in external explanatory meetings on ethical corporate management.			(4) Follow the Company's corporate management principles. (5) The Company will evaluate whether to conduct internal education and training on ethical corporate management on a regular basis in the future.。
3. (1) (2) (3)	Operation of the integrity channel Does the company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up? Does the Company have a standard operating procedure for the investigation of the matters to be investigated, follow-up measures to be taken after the completion of the investigation, and relevant confidentiality mechanisms? Does the company provide proper whistleblower protection?		V V	V	The Company has not established a specific reporting and reward system, but encourages internal and external personnel to report dishonest conduct or misconduct. The Company has established and announced an internal independent whistleblower mailbox hr@lotestech.com and a dedicated hotline on the Company's website and intranet site for the use of internal personnel. The Company's personnel who handle reports shall declare in writing that the identity of the whistleblower and the content of the report shall be kept confidential, and undertake to protect the whistleblower from being improperly dealt with as a result of the report.			The Company currently conducts the promotion of the Ethical Corporate Management Best Practice Principles and concepts through its internal website. In the future, depending on the effectiveness of the promotion, the Company will evaluate whether it is necessary to establish a reporting channel and a disciplinary and complaint system for violations of the Ethical Corporate Management Best PracticePrinciples.
4. Strengthening information disclosure Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website andMOPS?			V		The Company currently conducts the promotion of the Ethical Corporate Management Best Practice Principles and concepts through its internal website.			Follow the Company's corporate management principles.
5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation.: The Company currently operates in accordance with the spirit of the Ethical Corporate Management Best Practice Principles, except that the Company has not established a dedicated unit andhasnot established areporting channeland a disciplinary and complaint system for non-compliance with EthicalCorporateManagementBestPracticePrinciples.
6.Other important information to facilitate a better understandingof the company’s ethical corporate managementpolicies(e.g.,review and amend itspolicies).: None

• (8) If the Company has set up corporate governance principles and relevant rules, the Company shall disclose methods for inquiry: None

42

(9) Other important information to facilitate better understanding of the Company's corporate governance activities may be disclosed here: The Company’s website.

43

(10) Implementation status of internal control system

1. Statement of internal control system

Date: March 24, 2022

The Company's internal control system for 2021, based on the results of self-assessment, hereby states as follows:

1. The Company knows that it is the responsibility of the board of directors and managers of the Company to establish, implement and maintain the internal control system.The Company has established such system to reasonably assure the effectiveness and efficiency of operations (including profits, performance and asset security), report reliability, timeliness, transparency and compliance with relevant regulations.

2. An internal control system has its inherent limitations. No matter how perfect the design is, an effective internal control system can only provide reasonable assurance for the achievement of the above three objectives. Moreover, the effectiveness of internal control system may vary with the change of the environment and situation. However, the Company's internal control system has a self-monitoring mechanism. Once the deficiencies are identified, the Company will take corrective action.

3. The Company shall judge whether the design and implementation of the internal control system are effective or not according to the assessment items for the effectiveness of the internal control system stipulated in the “Regulations Governing Establishment of Internal Control Systems by Public Companies” (the Regulations). According to the assessment items adopted therein, the internal control system is divided into five elements based on the the process of management control: (1) environment control, (2) risk assessment, (3) control operation, (4) information and communication, and (5) supervision operation. Each component element also includes several items. For the above items, please refer to the provisions of the Regulations.

4. The Company has adopted the above internal control system to assess the items and evaluate the effectiveness of the design and implementation of the internal control system.

5. Based on the outcome of the foregoing assessment, the Company considers that the design and implementation of its internal control system (including supervision and management of its subsidiaries) as of December 31, 2021, regarding ther understanding of the effectiveness of operations and the extent to which efficiency objectives have been achieved, report reliability, timeliness, transparency and compliance with relevant regulations, are effective and that the system can reasonably ensure the attainment of the above objectives.

6. This statement constitutes the main content of the annual report and the prospectus of the Company and is made public. If any of the contents disclosed above is found to be false, have concealment or other illegal matters, it will involve legal liabilities under Articles 20, 32, 171 and 174 of the Securities and Exchange Act.

7. This statement was approved by the board meeting of the Company on March 21, 2022. Among the 7 directors present, no one held opposing opinions, while the rest agree with the content of this statement.

Lotes Co., LTD

Chairperson: Chu, Te-Hsiang

President: Ho, Te-Yu

44

• 2.Where a certified public accountant is entrusted to examine the internal control system, the audit report shall be disclosed: N/A.

• (11) During the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, the Company and its internal personnel have been punished according to the law or the Company has imposed punishment on its internal personnel for violating the provisions of the internal control system, been found to have major deficiencies and made improvements: none.

• (12) During the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, important resolutions of the shareholders meeting and the Board of Directors meeting:

• Contents of important resolutions of the Board of Directors and shareholders meeting

Sharehold ers / Board of Directors Meeting	Date	Important Resolutions
Board of Directors Meeting	2021.03.24	1.The amount and method of compensation for employees, directors and supervisors for the year ended December 31, 2020. 2.The Company's operating report, financial statements and consolidated financial statements for the year ended December 31, 2020 3. Distribution of the Company's earnings for the year ended December 31, 2020. 4.To issue the "Statement of Internal Control System" of the Company. 5.To revise certain provisions of the "Articles of Incorporation" of the Company. 6.To amend certain provisions of the Company's "Rules of Procedure for Shareholders' Meetings". 7.To establish the "Organizational Rules and Regulations of the Audit Committee" of the Company. 8.To revise certain provisions of the Company's "Control over the Acquisition or Disposal of Assets". 9.To revise the Company's "control over the lending of funds and endorsement and guarantee". 10.To revise the "Election of Directors and Supervisors" of the Company. 11. The Company proposed to apply for a comprehensive credit line of NT$600 million from South China Bank. 12,The Company intends to change its CPA. 13.To re-elect directors of the Company. 14.To convene the 2021 Annual General Meeting of Shareholders of the Company.
Board of Directors Meeting	2021.05.13	1. Intends to apply for a credit line of US$8,000,000 from Bank Sinopac and the Company will provide a guarantee to the investee company. 2. To apply for a credit line of US$5 million from Citi (Taiwan) for Lotes Guangzhou Co., Ltd., a 100% owned subsidiary of the Company, with the Company providing an endorsement guarantee to the subsidiary. 3. Panyu Deyi, the Company's mainland reinvestment company, and Lotes Suzhou Co., Ltd. intend to jointly invest in Lotes Zhongshan Co., Ltd. by contributing RMB150 million (total RMB300 million) individually. 4. The Company proposed to issue new shares in cash and to issue the first domestic unsecured convertible bonds.
Sharehold ers Meeting	2021.07.26	1. 2020 Business Report and Financial Statements. 2. Distribution of surplus for 2020. 3. Amendment to certain provisions of the "Rules of Procedure of the Shareholders' Meeting" of the Company. 4. Amendment to certain provisions of the Company's Articles of Association. 5. Amendment to certain provisions of the Company's "Control over the Acquisition or Disposal of Assets". 6. To amend the Company's "Control over the Lending and Endorsement of Funds and Guarantees". 7. Amendment to the "Method of Election of Directors and Supervisors" of the Company. 8. Election of the Company's directors.
Board of Directors Meeting	2021.08.3	1. To set the ex-dividend date for the Company's 2020 cash dividend. 2. The Company intends to abandon the subscription of the cash capital increase of its subsidiary Lerain Technology Co. 3. The Company intends to appoint the fifth term of the Salary and Compensation Committee.

45

Sharehold ers / Board of Directors Meeting	Date	Important Resolutions
Board of Directors Meeting	2021.08.11	1. The Company's financial report for the second quarter of 2021. 2. The Company intends to apply for a credit facility of NT$100 million from China Trust (renewal). 3. The Company intends to apply for a credit facility of NT$200 million and US$6 million from Bank Sinopac. 4. The Company intends to apply for a credit line of NT$200 million and US$6 million from E-Sun Bank. 5. The Company intends to apply for a credit line of NT$200 million and US$6 million from Bank Sinopac. 6. The Company applies for a credit line of US$10 million from Citi (Taiwan) for Lotes Guangzhou Co., Ltd., a 100%-owned subsidiary of the Company, and the Company provides an endorsement guarantee to the subsidiary. 7. The Company intends to apply for a consolidated credit line of US$7 million from MegaInternationalCommercial Bank.
Board of Directors Meeting	2021.08.27	1. The Company's 2021 annual cash capital increase for employees and the allocation of the amount of new shares to be issued to managerial employees are proposed. 2. Jiayu Investment Co., Ltd., a 100% owned subsidiary of the Company, intends to abstain from subscribing for the cash capital increase of its subsidiary, Laida Technology Co.
Board of Directors Meeting	2021.11.11	1. The Company's financial statements for the third quarter of 2021. 2. The Company provided an endorsement guarantee for its subsidiary, Lerain Technology Co. 3. The Company intends to apply for a credit facility from Hua Nan Bank in the amount of NT$600 million. 4. In order to meet the capital needs of Lotes Guangzhou Co., Ltd., the Company's Mainland subsidiary, for the future expansion of its operating facilities and the flexible use of the Group's working capital, the Company intends to apply for a loan from the Company to its subsidiary, Panyu Deyi, within a limit of RMB50 million.
Board of Directors Meeting	2021.12.16	1. The Company's managers and employee compensation for 2020 and year-end bonuses for 2021. 2. The Company provided an endorsement guarantee for its subsidiary, Lerain Technology Co. 3. The Company intends to apply for a consolidated credit line of US$20 million and a derivative trading line of US$5 million from Taipei Fubon Commercial Bank.
Board of Directors Meeting	2022.01.27	The Company intends to forgo the subscription of a cash capital increase for its subsidiary, Lerain Technology Co.
Board of Directors Meeting	2022.03.03	The Company's proposed acquisition of real estate - land for factor
Board of Directors Meeting	2022.03.21	1. To approve the budget of the Company for the year 2022. 2. To approve the remuneration for the employees and directors of the Company for 2021. 3. The Company's 2021 Business Report, Financial Statements and Consolidated Financial Statements. 4. Propose distribution of the Company's 2021 earnings. 5. Propose issuance of the "Statement of Internal Control System" of the Company. 6. Propose amendments to the Company's Articles of Incorporation. 7. Revise the Company's "Control over the Acquisition or Disposal of Assets". 8. Propose amendments to the Company's "Rules of Procedure of Shareholders' Meetings". 9. To amend the Company's plan to issue new shares for cash and the first domestic unsecured convertible bonds in 2021. 10. Propose to change its auditing accountant. 11. The Company's periodic evaluation of the independence and suitability of the CPA. 12. The Company intends to apply for a consolidated credit line of NT$400 million and US$6 million from Bank SinoPac. 13. The Company applied to Citibank for a credit line of US$20 million for Lotes Guangzhou Co., Ltd., a 100% owned subsidiary of the Company, and the Company provided an endorsement guarantee to the subsidiary. 14. The Company's first domestic unsecured convertible bonds were converted into new shares. 15. The Company's 2022 Annual General Meeting of Shareholders was held.

46

2.Review of the implementation of matters resolved at the 2020 annual general meeting of shareholders

ShareholdersMeetingResolutions	ImplementationStatus
1. 2019 Annual BusinesGgs Report and Financial Statement.	The Company’s 2019 operating revenue was NT$15,088,872 thousand, net income was NT$2,076,043 thousand and earnings percommonstockwas NT$20.11.
2. 2019 Surplus Distribution.	In accordance with the resolution, the shareholders allotted a cash dividend of NT$10.5 per share and a total of NT$1,086,517 thousandincash.
3. Amendment to the Company’s “The Rules of Procedure ofthe Shareholders' Meeting.”.	Execute as resolved.

• (13) During the most recent fiscal year and as of the date of publication of the annual report, the directors or supervisors disagreed with the Board of Directors on the adoption of a significant resolution and there is a record or written statement to the effect: none.

• (14) During the most recent year and as of the date of this annual report, the resignations and terminations of the Company's chairperson, president, accounting supervisor, finance supervisor, internal audit supervisor and research and development supervisor were summarized as follows: None.

5. Accountants’ Information

• (1) Information on CPA professional fees:

			Unit: NT$ thousand Audit Fee Non-audit Fee Total Remarks 5,355 70 5,425 Non-audit fee for accountants to review CB's submission ─ 450 450Transfer Pricing and Master File Reporting	Unit: NT$ thousand Audit Fee Non-audit Fee Total Remarks 5,355 70 5,425 Non-audit fee for accountants to review CB's submission ─ 450 450Transfer Pricing and Master File Reporting	Unit: NT$ thousand Audit Fee Non-audit Fee Total Remarks 5,355 70 5,425 Non-audit fee for accountants to review CB's submission ─ 450 450Transfer Pricing and Master File Reporting	Unit: NT$ thousand Audit Fee Non-audit Fee Total Remarks 5,355 70 5,425 Non-audit fee for accountants to review CB's submission ─ 450 450Transfer Pricing and Master File Reporting
Accounting Firm	Name of CPA	Audit Period	Audit Fee	Non-audit Fee	Total	Remarks
KPMG Taiwan	Li,Fung-Hui	2021	5,355	70	5,425	Non-audit fee for accountants to review CB's submission
	Chung, Tan-Tan	2021
KPMG Taiwan	─	2021	─	450	450	Transfer Pricing and Master File Reporting

1. If the audit fee for the year of replacement of an accounting firm is less than the audit fee for the year before the replacement, the amount of the audit fee before and after the replacement and the reason shall be disclosed and the reason: N/A.

2. If the audit fee is reduced by more than 15% from the previous year, the amount, proportion and reason for the reduction shall be disclosed: N/A.

3. (2) Information on replacement of CPA:

4. Regarding the former CPA:

shall be disclosed: N/A. Information on replacement of CPA: Regarding the former CPA:
Replacement Date	February 21, 2020
Replacement reasons and explanations	The Company's original CPAs were Chung, Tan-Tan and Chen, Fu-Wei from KPMG Taiwan, who were rotated to meet the requirements of Statement of Auditing Standards No. 46, the relevant laws and regulations of the competent securities authorities and their risk management. The Company's CPAs have been changed to Lee,Feng-Hui and Chung,Tan-Tan.
Describe whether the Company terminated or the CPA did not accept the appointment	Parties Status			CPA	The Company
	Termination of appointment			－	－
	No longer accepted (continued)appointment			－	－
Other issues (except for unqualified issues) in the audit reports within the last twoyears		None
Differences with the company	Yes	－	Accounting principles or practices
		－	Disclosure of Financial Statements
		－	Audit scope or steps
		－	Others
		－
	None	

47

Replacement Date	February 21, 2020
	Explanations
Other Revealed Matters (Article 10, Subparagraph 6, Item 1-4 to 1-7 of this Standard)	None

1. Regarding the successor CPA:

garding the successor CPA:
Name of accountingfirm	KPMG Taiwan
Name of CPA	Lee,Feng-Hui
Date of appointment	February21,2020
Consultation results and opinions on accounting treatments or principles with respect to specified transactions and the company's financial reports that the CPA might issueprior to the engagement.	None
Succeeding CPA’s written opinion of disagreement toward theformerCPA	None

1. Letter of reply from the former accountants: N/A.

2. (3) The Company’s Chairperson, CEO, CFO, and Managers in charge of its finance and accounting operations did not hold any positions in the Company’s independent auditing firm or its affiliates during the latest fiscal year :None.

3. Transfer or pledge of shares by the company's directors, supervisors, managers and stockholders with more than 10% of the company's shares:

4. (1) Changes in shareholding transfers by directors, supervisors, managers and substantial shareholders

Unit: shares

Title	Name	2021	2021	As of March 31 of 2022	As of March 31 of 2022
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairperson	Jiaming Investment Ltd.Rept.: Chu, Te-Hsiang
		0	0	0	0
Chairman's legal representative	Chu, Te-Hsiang
		4,450	0
Director	Jiaming Investment Ltd.Rept.: Ho, Te-Yu
		0	0	0	0
Chairman's legal representative	Ho, Te-Yu
		11,553	0	0	0
Director	Tsai, Ming-Jui(Note 1)
		(954)	0	0	0
Director	JIN, CHAN-MING (Note 1)
		0	0	0	0
Director	Hsieh, Chia-Ying(Note 2)
		0	0	0	0
Director	Chu, Chien-Chung(Note 2)
		0	0	0	0
Independent Director	Hsieh, Chia-Ying(Note 3)
		0	0	0	0
Independent Director	HU, REI-CHIN(Note 3)	0	0	0	0
Independent Director	Wang, Jen-Chun(Note 4)
		0	0	0	0
Independent Director	Chiang, I-Cheng(Note 4)
		0	0	0	0
Independent Director	Wu, Chang-Hsiu(Note 4)	0	0	0	0
Spervisor and Shareholder	Jin Ling Investment INC. Rept.：CHANG, KUN-YAO (Note 5)
		0	0	0	0

48

Title	Name	2021	2021	As of March 31 of 2022	As of March 31 of 2022
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Spervisor and Corporate Rept.	CHANG, KUN-YAO (Note 5)
		0	0	0	0
Spervisor	CHENG, MING-SONG(Note 5)
		0	0	0	0
Spervisor	YANG, WEN-MING (Note 5)
		0	0	0	0
President	Ho,Te-Yu	11,553	0	0	0
R&D Chief	Chu, Te-Hsiang	4,450	0	0	0
President OfficeAssociate Manager	Chu-Chen, Yi-Hui
		5,001	0	0	0
Sales Div. Senior Vice President	Tsai, Ming-Jui
		(954)	0	0	0
Management Department Vice President	Lu, Chih-Cheng(註6)
		0	0	0	0
Management Department Vice President	Kung, Yung-Sheng
		6,000	0	0	0
Management Department Associate Manager	Lin, Ching-Hao
		0	0	0	0
Management Department AssociateManager	Lin, Tsun-Te
		(1,000)	0	0	0
Management Department Associate Manager	Lin, Ko-Lun
		0	0	0	0
Management Department Associate Manager	Lin, Yao-Ching
		0	0	0	0
Sales Div. 1st Sales OfficeAssociate Manager	Wu, Yi-Chen
		3,000	0	0	0
Sales Div. 2nd Sales OfficeAssociate Manager	Li, Cheng-Wen
		0	0	2,000	0
Financing Dept. Manager	Liu, Hsing-Hsia
		0	0	0	0
Financing Dept. Vice Manager	Liang, Shih-Yi
		0	0	0	0
Audit Director	Wang,Hsi-Hung	0	0	0	0
Management Department Associate Manager	LIU, CHI-HONG
		2,000	0	0	0
Management Department AssociateManager	HO, CHI-HSIANG
		0	0	0	0
Management Department Associate Manager	WU, YU-WEI(Note7)
		0	0	0	0

Note 1: The Company vacated its directorship on July 16, 2021 following a general re-election of directors by the Board.

Note 2: The Company assumed the office of Directorship following the general re-election of Directors at the July 16, 2021 Board meeting, of which Mr. Hsieh, Chia-Ying was re-elected from Independent Director to Director.

Note 3: The Company assumed the office of Independent Director upon the general re-election of Directors on July 16, 2021, of which Mr. Hsieh, Chia-Ying was re-designated as a Director from Independent Director.

49

Note 4: The Company assumed the position of Independent Director upon the general re-election of Directors at the Board meeting on July 16, 2021.

Note 5: The Company did not have a Supervisor after the Audit Committee replaced the Supervisor function in the general re-election of Directors at the Board Meeting on July 16, 2021.

Note 6: Vice President Lu, Chih-Cheng retired on 2021.9.30. Note 7: Associate Manager WU, YU-WEI resigned on 2021.8.23.

(2) Information on Relative Persons Related to the Transfer of Equity.

Name	Reasons for Equity Transfer	Date	Counterparties	Relationship of Counterparties to the Company, Directors, Supervisors, Managers and Shareholders Holding More than 10% of the Shares	Shares	Transactio n Price
None	None	None	None	None	None	None

• (3) Information on Relative Persons to the Equity Pledge: None

50

7. Relationship among the Top Ten Shareholders ：

April 19, 2022

							April 19,2022	April 19,2022
Name	Current Shareholding		Spouse’s/Minor’s Shareholding		Shareholding by Nominee Arrangement		Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees		Remark s
	Shares	%	Shares	%	Shares	%	Name	Relationship
Jinling Investment Co. Ltd.	10,956,237	10.32%	0	0.00%	0	0.00%	Ho, Te-Yu	Jinling Investment Co., Ltd. Chairperson
							Chu, Te-Hsiang	Jinling Investment Co., Ltd. Supervisor
Chia Ming Investment Ltd.	9,797,037	9.23%	0	0.00%	0	0.00%	Chu, Te-Hsiang	Jiaming Investment Co., Ltd. Chairperson
							Chu-Chen, Yi-Hui	Jiaming Investment Co., Ltd. Supervisor
New Labor Pension	7,444,367	7.01%	0	0.00%	0	0.00%	None	None
Dun Lin Investment Co.,Ltd.	5,000,000	4.71%	0	0.00%	454,108	0.43%	Ho, Te-Yu	Jinling Investment Co., Ltd. Chairperson
Cathay Life Insurance Company,Ltd.	4,930,640	4.64%	0	0.00%	0	0.00%	None	None
Fubon Life Assurance Co.,Ltd.	4,770,937	4.49%	0	0.00%	0	0.00%	None	None
Dechuan Investment Co.,Ltd.	2,951,388	2.78%	0	0.00%	15,926	0.01%	Chu, Te-Hsiang	Jiaming Investment Co., Ltd. Chairperson
Deutsche Bank to manage Swedbank's Robo Technology Investment Account	2,600,000	2.45%	0	0.00%	0	0.00%	None	None
Investment account of Deutsche Bank entrusted to Richard's Equity Trust for small companies	2,100,000	1.98%	0	0.00%	0	0.00%	None	None
Old Labor Pension	2,029,882	1.91%	0	0.00%	0	0.00%	None	None

1. Information on the number of shares of the company invested by the company, any of the company’s directors and supervisors and executive officers or a company directly or indirectly controlled by the company and consolidated percentage of shareholding:

The Company's shareholdings in the investee companies are 100% owned by the Company and no joint shareholding with others or other companies has occurred.

51

IV. Capital Overview

1. Capital and shares

(1). Source of capital

Unit: thousand shares/ $ thousand

						Unit: thousand shares/$thousand	Unit: thousand shares/$thousand	Unit: thousand shares/$thousand
Date	Insurance Price (NT$)	Authorized Capital		Paid-in Capital		Remarks
		Shares	Amount	Shares	Amount	Sources of Capital (NT$)	Capital Increased by Assets Other than Cash	Other
76.12	－		5,000		5,000	$5 million capital stock of establishment	－	Jian-San-Ding-Zi Letter No. 344438 dated December 1,1987
87.09	10,000	2.5	25,000	2.5	25,000	Cash capital increase of $20 million	－	Jian-San-Ding-Zi Letter No. 230910 dated September 22,1998
93.09	10	12,012	120,120	12,012	120,120	Cash capital increase of $95.12 million	－	Jing-Zhong-Zi Letter No. 09332670500 dated September3,2004
93.10	10	44,500	445,000	44,500	445,000	Cash capital increase of $324.88 million	－	Jing-Zhong-Zi Letter No. 09332928790 dated October 27,2004
93.12	18	49,400	494,000	49,400	494,000	Cash capital increase of $49 million	－	Jing-Zhong-Zi Letter No. 09333306580 dated January 6,2005
94.10	10	61,000	610,000	52,320	523,200	Capitalization of retained earnings of $29.2 million	－	Jing-Zhong-Zi Letter No. 09401205920 dated October 17,2005
95.08	10	61,000	610,000	55,686	556,860	Capitalization of retained earnings of $33.66 million	－	Jing-Shou-Shang-Zi Letter No. 09501181500 datedAugust18,2006
95.08	16.5	61,000	610,000	59,166	591,660	Cash capital increase of $34.8 million	－	Jing-Shou-Shang-Zi Letter No. 09501185810 dated August 23,2006
96.03	10	61,000	610,000	60,349	603,493	Capitalization of capital reserves of $11.83 million	－	Jing-Shou-Shang-Zi Letter No. 09601038990 dated March 1, 2007
96.08	10	105,000	1,050,000	63,820	638,200	Capitalization of retained earnings of $34.71 million	－	Jing-Shou-Shang-Zi Letter No. 09601189090 dated August 6, 2007
97.01	41	105,000	1,050,000	71,174	711,740	Cash capital increase of $73.54 million	－	Jing-Shou-Shang-Zi Letter No. 09701004250 dated January 14, 2008
97.08	10	105,000	1,050,000	76,232	762,327	Capitalization of retained earnings of $50.587 million	－	Jing-Shou-Shang-Zi Letter No. 09701196230 dated August 5, 2008
98.12	14.98	105,000	1,050,000	77,104	771,041	Capitalization of employee stock warrants of$8.714 million	－	Jing-Shou-Shang-Zi Letter No. 09801280550 datedDecember7,2009
99.02	116.5	105,000	1,050,000	83,104	831,041	Cash capital increase of $60 million	－	Jing-Shou-Shang-Zi Letter No. 09901038450 datedMarch 2,2010
99.09	140	105,000	1,050,000	93.104	931.041	Cash capital increase of $100 million	－	Jing-Shou-Shang-Zi Letter No. 09901213910 dated September 23,2010
100.01	10.98	105,000	1,050,000	93.313	933.139	Capitalization of employee stock warrants of $2.098 million	－	Jing-Shou-Shang-Zi Letter No. 10001008880 dated January 17, 2011
100.08	10.98	105,000	1,050,000	93,477	934,779	Capitalization of employee stock warrants of$1.64 million	－	Jing-Shou-Shang-Zi Letter No. 10001184600 datedAugust15,2011
108.01	140	155,000	1,550,000	103,477	1,034,779	Cash capital increase of $100 million	－	Jing-Shou-Shang-Zi Letter No. 10801009430 dated January23,2019
110.12	432	155,000	1,550,000	105,977	1,059,779	Capital increase in cash NT$25 million		Jing-Shou-Shang-Zi Letter No. 11001182950 dated Oct. 8, 2021
111.04	547.5	155,000	1,550,000	106,095	1,060,946	CB Conversion Shares		Jing-Shou-Shang-Zi Letter No. 11101057920 dated Apr. 19, 2022

52

Unit: shares

				Unit: shares
Share Type	Authorized Capital			Remarks
	Issued Shares	Un-issued Shares	Total Shares
Registered Shares	106,094,609	48,905,400	155,000,000

Summary of information related to the reporting system: N/A. (1). Shareholder structure

(1). Shareholder structure	(1). Shareholder structure
					April 19,2022
Shareholder structure Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	4	138	57	3,626	322	4,147
Shareholding (shares)	10,267,479	20,103,932	31,034,534	7,932,562	36,851,255	106,189,762
Percentage	9.67%	18.93%	29.23%	7.47%	34.70%	100.00%

(2) Diffusion of ownership

April 19, 2022

2) Diffusion of ownership			April 19,2022
Class of Shareholding (Unit: shares)	Number of Shareholders	Shareholding (Shares)	Percentage
1- 999	2,157	231,565	0.22%
1,000- 5,000	1,413	2,390,650	2.25%
5,001- 10,000	144	1,045,421	0.98%
10,001- 15,000	67	809,724	0.76%
15,001- 20,000	59	1,020,916	0.96%
20,001-30,000	49	1,249,005	1.18%
30,001- 40,000	42	1,463,545	1.38%
40,001-50,000	21	973,683	0.92%
50,001- 100,000	67	4,768,321	4.49%
100,001- 200,000	49	7,191,483	6.77%
200,001- 400,000	40	11,365,841	10.70%
400,001- 600,000	12	6,005,925	5.66%
600,001- 800,000	5	3,563,811	3.36%
800,001-,000,000	8	7,082,168	6.67%
Over 1,000,001	14	57,027,704	53.70%
Total	4,147	106,189,762	100.00%

Diversification of shareholding in preference shares: N/A.

(4). List of major shareholders

Unit: shares April 19,2022	Unit: shares April 19,2022	Unit: shares April 19,2022
Shares Major Shareholders	Shares	Percentage
Jinling Investment Co., Ltd.	10,956,237	10.32%
JiamingInvestment Co.,Ltd.	9,797,037	9.23%
New System Labour Retirement Fund	7,444,367	7.01%
Dunlin Investment Co.,Ltd.	5,000,000	4.71%
CathayLife Insurance Co.	4,930,640	4.64%
Fubon Life Insurance Co.	4,770,937	4.49%
Dechuan Investment Co.,Ltd.	2,951,388	2.78%
Deutsche Bank Custody of Swedbank Robb Technology Investment Account	2,600,000	2.45%
SCB Custodianshipof Swedbank Robb Global Fund	2,100,000	1.98%
Old System Labour Retirement Fund	2,029,882	1.91%

53

(5). Market Price per share,net worth per share,earnings per share,dividends per share,and related information for the past 2 fiscal years

Unit: NT$

s						Unit: NT$
Item	Year			2020	2021	As of March 31, 2022 for the year
Market Price per Share	HighestMrketPrice			488	774	774
	Lowest Market Price			231.5	476	468
	Average Mrket Price			359	625	621
Net Worth per Share	Before Distribution			130.45	130.45	－
	After Distribution			117.15	－	－
Earnings per Share	Weighted Average Shares (thousand shares)			103,478	104,204	105,978
	Earnings per Share		Before adjustment	26.41	33.32	－
			After adjustment	26.34	32.69	－
Dividends per Share	Cash Dividends			13.3	16.2	－
	Stock Divid ends	Dividends from Retained Earnings		－	－	－
		Dividends from Capital Surplus		－	－	－
	Accumulated Undistributed Dividends			－	－	－
Return on Investment	Price / Earnings Ratio			13.59	18.76
	Price / Dividend Ratio			26.99	38.58	－
	Cash Dividend Yield Rate			3.70%	2.59%	－

• (6). Dividend Policy and Implementation Status

• The Company's Articles of Incorporation provide that the Company shall set aside not less than 3% of its annual profits for the remuneration of employees and not more than 3% for the remuneration of directors and supervisors. However, if the company has accumulated losses, it shall retain the amount of compensation in advance and allocate the remuneration of employees and directors and supervisors in proportion to the above. The above-mentioned employees' remuneration may be paid in stock or cash to employees of a subsidiary company who meet certain criteria.

  • If there is any surplus after the final settlement of each year, the Company shall first complete the tax contribution, make up the deficit of the previous year and set aside 10% of the surplus as legal reserve, except when the legal reserve has reached the total capital; if there is any surplus and the accumulated undistributed surplus, the Board of Directors shall prepare a proposal for the distribution of the surplus and submit it to the shareholders' meeting for resolution, and the shareholders' bonus to be distributed shall not be less than 20% of the net income after tax less the amount of legal reserve.

The Company will take into account the environment and growth stage of the Company and will expand its business in the future. The distribution of earnings should take into account the Company's future capital expenditure budget and capital requirements, and pay cash dividends of not less than 10% of the dividends distributed in the current year. 2.Proposed dividend distribution at the shareholders' meeting ：

• To appropriate a cash dividend of NT$1,695,646,400 out of the 2021 surplus, to be allotted at NT$16 per share, and to authorize the Board of Directors to fix another dividend distribution base date upon the approval of the shareholders' meeting.

• (7). Effect upon Business Performance and Earnings per Share of any Stock Dividend Distribution Proposed or Adopted at the Most Recent Shareholders’ Meeting: None.

• (8). Employee Bonus and Directors' and Supervisors' Remuneration

• Ratio or scope of remuneration for employees, directors and supervisors as set forth in the Articles of Incorporation: please refer to the description in (6) above.

• The basis for estimating the amount of employee and directors’compensation, for calculating the number of shares to be distributed as employee compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:

• In accordance with the Ji-Mi-Zi Interpretation Letter No. 052 of the Accounting Research and Development

• Foundation (96), the Company estimates the amount of employee remuneration and directors' and supervisors' remuneration since January 1, 2008 and recognizes it as an appropriate accounting item under operating costs or operating expenses based on the nature of the employee remuneration and directors' and supervisors' remuneration. Any difference between the resolution of a subsequent shareholders' meeting and the estimates in the financial statements is treated as a change in estimates and recorded as profit or loss for the period.

• Information on any approval by the board of directors of distribution of compensation:

• (1) Amount of employee remuneration and directors' and supervisors' remuneration distributed in cash or shares. Proposed employee cash bonus of NT$122,062,000.

  • Proposed remuneration for directors and supervisors is NT$4,480,000.

54

• (2) The amount of any employee compensation distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income stated in the parent company only financial reports or individual financial reports for the current period and total employee compensation: the Company did not pay any employee stock dividends during the period.

• Actual distribution of remuneration to employees, directors and supervisors during the prior year: The Company's net income after tax for 2020 was $2,732,361 thousand, and the Board of Directors resolved to distribute employee remuneration of $97,235 thousand and director and supervisor remuneration of $4,480 thousand for 2020, which is the same as the actual distribution of employee, director and supervisor remuneration totaling $101,805 thousand for 2020 as resolved by the Board of Directors and reported at the 2021 Annual Meeting of Shareholders.

(9). Share repurchases: None

1. Issuance of corporate bonds: (1)Corporate Bond

Issuance of corporate bonds: (1)Corporate Bond	Issuance of corporate bonds: (1)Corporate Bond
Type of corporate bond (Note 2)		First unsecured corporate bonds
Issue(Processing)Date		Aug.19,2021
Nominal value		NT$100,000
Place of issue and transaction(Note 3)		─
Issue Price		Issued at 115.45% ofpar value
Total Amount		Total denomination of the issue is NT$1 billion
Interest Rate		Coupon rate 0%per annum
Term		3years /Expirydate: 19.8.2024
Guaranteed Institution		None
Trustee		Hua Nan Commercial Bank
Underwriter		Yuanta Securities Co.
SignatorySolicitors		Far East United Law Firm,CHIU,YA-WEN LAWYER
CPA		KPMG Li FungFai,CPA and Dan Dan Chung,CPA
Repayment Method		The source of repayment of the Company's debts during the life of the debentures will be charged to operating and financing activities
Unredeemedprincipal		There is no outstandingbalance on the Company's initial issue of corporate bonds.
Terms of redemption or early settlement		If the closing price of the Company's common stock on the TWSE exceeds the then current conversion price of the Bonds by more than 30% (inclusive) for 30 consecutive business days from the day after the expiration of three months from the date of issuance (November 19, 110) until 40 days prior to the expiration of the issuance period (July 10, 113), the Company may, within 30 business days thereafter, send the Bonds by registered mail to (the holder of the Bonds (as stated in the Register of Bondholders on the fifth business day prior to the date of mailing, or by way of announcement for holders who subsequently acquire the Bonds through trading or otherwise) a "Notice of Call" for the expiry of the 30-day period (the aforesaid period shall be counted from the date of mailing by the Company and the expiry date of such period shall be the reference date for the call of the Bonds, and the aforesaid period shall not be the period of cessation of conversion under Article 9) The Company shall, upon the expiry of such period, send a letter to the Counterparty and request the Counterparty to announce and collect the Bonds from the Bondholders in cash at their face value within five business days after the Bond Collection Date.
Restricted Terms		None
Name of credit rating agency, rating date, corporate bond ratingresult		NA
Other Rights	Amount of ordinary shares, overseas depositary receipts or other marketable securities converted (exchanged or warrants) as at the date of printing of the annual report				Conversion of ordinary shares 211,862
			Amount converted ($'000)	Conversion Price i.e. issue price (pershare)	Conversion of ordinary shares
			116,000	547.5	211,862
	Method of issue and conversion (exchange or share option)	Please refer to the issuance and conversion rules of the Company's first domestic unsecured convertible bond issue in 2021.
Te method of issue and conversion, exchange or subscription, the possible dilution of shareholdings by the terms of issue and the effect on the interests of existing shareholders		Based on the current conversion pric e, 1,614,611 shares will be issued upon full conversion of the remaining bonds into ordinary shares, representing an equity expansion rate of 1.50% (please calculate based on the expected conversion of 1,614,611 shares/(current number of outstanding shares + expected conversion of 1,614,611 shares)), which will have limited impact on shareholders' equity.
Name of the custodian for the exchange of the subject		NA

(2) Converted Corporate Bonds Information

55

Type of corporate debt (Note 1)	Type of corporate debt (Note 1)	First unsecured conversion of corporate bonds	First unsecured conversion of corporate bonds
Item	Year	2021	Current Year (Note)
Market price (Note 2)	Highest	141	139.8
	Lowest	113	124.4
	Average	123.54	132.92
Conversion Price		547.5	547.5
Issue (processing) date and conversion price on issue		2021/11/20 563.20 dollars
Manner of fulfilling conversion obligations (Note 3)		Issue of New Shares	Issue of New Shares

(3)Reporting of corporate bonds issued: None.

1. Issuance of preferred shares: None

2. Issuance of global depository receipts: None

3. Eemployee subscription warrants:

4. (1) Eemployee subscription warrants

Eemployee subscription warrants: 1) Eemployee subscription warrants	Eemployee subscription warrants: 1) Eemployee subscription warrants
April 14,2018
Types of Employee Stock Option Warrants	First (period) Types of Employee Stock Option Warrants
Date of effective registration	2007.07.30
Issue date	2007.08.13
Number of units issued	1,253,000 units
	(1,253,000 common stocks)
Ratio of subscribed shares issued to total number of shares issued (Note1)	1.34%
Subscription Period
	Within five years from the actual issue date
Exercise Method	Issuance of new shares
Period and ratio in which subscription is restricted	70% after 2years;
	100% after3 years
Numberofshares obtained	1,245,200
Amount of the shares subscribed	17,157,901
Numberofshares thathavenot beensubscribed	7,800
Subscriptionprice pershare ofthe unsubscribed shares	10.98
Ratio of the number of unsubscribed shares to the number of issued and outstanding shares	0.01%
Date of effective registration	This Stock Option Warrant shall be executed over five
	years after the expiration of two years from the Issue
	Date.
	As of December 31, 2012, the remunerative employee
	stock option plan has expired and the outstanding stock
	options as of the expiration date are deemed to be
	waived, therefore the unexecuted portion of the stock
	options no longer has anyeffect on shareholders' equity.

56

(2) The names of the managers who acquired the employee stock options and the top ten employees who acquired the stock options, the acquisition and subscription status

Unit: shares; Unit: TWD

													Unit: shares;Unit: TWD	Unit: shares;Unit: TWD	Unit: shares;Unit: TWD	Unit: shares;Unit: TWD
	Title	Name	Number of shares acquired	Ratio of the number of subscribed acquired shares to the number of issued and outstanding shares		Implemented (by2 years)			Implemented (by 3 years)				Not implemented
					Number of shares acquired	Price of shares acquired	Amount of shares acquired	Ratio of the number of subscribed shares to the number of issued and outstanding shares	Number of shares acquired	Price of shares acquired	Amount of shares acquired	Ratio of the number of subscribed shares to the number of issued and outstanding shares	Number of shares acquired	Price of shares acquired	Amount of shares acquired	Ratio of the number of subscribed shares to the number of issued and outstanding shares
Manager	Vice President, Sales Dept.	Tsai, Ming-Jui	371,000	0.40%	259,700	14.98	3,890,306	0.28%	111,300	10.98	1,222,074	0.12%	0	0	0	0
	Management DepartmentVice President	Lu, Chih-Cheng
	Management DepartmentVice President	Kung, Yung-Sheng
	Management Department Associate Manager	Lin, Ching-Hao
	Financing Dept. Manager	Liu, Hsing-Hsia
	Financing Dept. Vice Manager	Liang, Shih-Yi
Staff	--	--	--	--	--	--	--	--	--	--	--	--	--	--	--	--

1. Restriction on issuning of new employee option

2. Share issuance of merger company

3. Implementation of the capital utilization plan: N/A.

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V. Overview of Business Operations

A.Description of the business

• (1). Scope of business

• Main business operation and sales ratio

• (1) Main operation for businesses

  • A. Trading of various hardware parts and tool parts.

  • B. Trading, manufacturing and processing various terminals and their finished connectors.

  • C. Trading, manufacturing and processing electronic components.

  • D. Trading, manufacturing and processing precision tooling.

• (2) Main products and their sales ratio

Unit: 1,000 TWD

	2021 Net Operating Sales
Major products		Sales Ratio (%)
	(Note)
Connectors (with cables)	20,832,390	97.38%
Other Electronic Components	559,527	2.62%
Total	21,391,917	100.00%

2. The Company’s current products and services

The Company’s products are various connectors and components for computers, communications and mobile phones, and consumer electronic.

1. New products and services in planning

In order to continuously provide high quality products to clients, the Company continue to improve comprehensively on its process standard and energy in design, manufacturing process, quality control and testing, and to achieve the goals of high growth. Sparing no effort in developing new products, it keep developing towards fine pitch and high-density connectors. To match the future market trend of high speed connectors, it has recently been further developed into more actively engage in analyzing high-current, high-frequency connectors and developing capability to meet the market demand. In addition, to expand product lines and market scale, the Company had successfully developed the relevant connectors required for high-frequency server, automobiles, high-speed transmission devices and the latest transmission interface Type-C.

• (2). Overview of the industry:

• (1)Status and development trends of the industry

Electronic connectors (cables) refers to all the connecting elements and accessories used for electronic signals and power supplies, whose main function is to provide a separable interface between two subsystems within an electronic system to enable the smooth transmission of signals or power. As electronic connectors (wires) are considered to be the bridge for all signals and are used to connect components to each other, the quality of the product is clearly related to the reliability of the signal transmission, which in turn affects the operation of the entire electronic machine. The downstream market for electronic connector (wire) products is very broad. They are used in a wide range of applications, including chip and component connections, PCB (Printed Circuit Board) board-to-board connections, host and I/O (Input/Output) connections, external power supply and external signal connections, etc. Currently, they are mainly used in personal computer (PC) and peripheral, network communications, automotive electronics (AE), green energy, consumer electronics, etc. Peripherals, network communications, automotive electronics, green energy, consumer electronics, etc.

According to a research report by Taiwan Economic Research Institute (TEI), as the COVID-19 epidemic outbreak in 2020, the home economy is booming and home working and telecommuting have become the new norm in life, leading to a surge in demand for DT/NB/Tablet products and servers for medium and large data centres worldwide, which in turn effectively drives the replacement of connectors (cables) with high speed, high frequency, durability and miniaturization (e.g. board-to-board connectors). The lack of effective control of the epidemic has led to varying degrees of closure in major economies, resulting in some disruption of logistics and limited cargo/vessel traffic at local gateways. In view of the overall economic downturn and the uncertainty brought about by the epidemic, the general public is less willing to spend on traditional end-use products such as automobiles and household appliances, resulting in the combined revenue growth of the major players in the connector industry in Taiwan being under pressure.

However, demand for Apple's True Wireless Stereo (TWS) Airpods continues to be strong, with the launch of the 5G version of the iPhone, which comes with a braided cable charging cable, and the iPad Air4, which will be the first to introduce a USB-C port, in the fourth quarter of 2020. Intel and AMD are accelerating their CPU upgrade process in the notebook and server sectors respectively, while China's new infrastructure policy has led to a significant recovery in the new energy vehicle, smart manufacturing and 5G base station markets. Most manufacturers have made significant achievements in developing niche applications in green energy (e.g. wind and solar power), home healthcare (e.g. respirators) and industrial control (e.g. semiconductor devices). The gross margins of most major players in the Taiwan connector industry are estimated to increase significantly in 2020 compared to 2019, resulting in significant growth in their combined industry profitability. Foreign exchange losses arising from the significant appreciation of the New Taiwan dollar since 2020 have had a significant impact on the net profit of major

58

manufacturers (attributable to the owners of the parent company) in the current period.

==> picture [467 x 335] intentionally omitted <==

With the saturation of these markets, many connector companies are now moving to other electronic product markets. In recent years, the connector companies have stepped up their operations in the fields of 8 electric vehicles, 5G infrastructure and high-current connectors for smart grid.

(a) High Frequency and High Speed Technology The future is the generation of 5G high-speed and high data capacity communication network, and the network world is everywhere. Compared with the previous generation of mobile networks, 5G communication will carry the technology of large data and high transmission efficiency, so in the era of 5G Internet, the connector technology also needs to enhance the "speed" function. The number of 5G users will multiply rapidly in the future, and 2020 is also a critical time for deployment.

(b) Higher accuracy and lower cost In the future smart era, connectors will require more accuracy, such as car safety in the car network. The automotive connector market is a very large market, and with the trend toward electric vehicles, connectors will be more accurate and the market will become more popular than ever.

(c) More compact design technology In the era of high speed transmission of big data, a fiber optic equipment device may have multiple very small connectors to achieve higher performance transmission connections.

59

(d) Automated production technology With the move toward automated industrial production, connectors will become an important force in the development of modern industry with the support of precision machining technology, advanced mold design, and advanced CAD.

(2)Connection between upstream, midstream and downstream industries

==> picture [449 x 364] intentionally omitted <==

(3) Various developing trends of products

Connectors are widely used in automobile and computer peripherals application, communication data application, industrial, aerospace & defense, transportation, consumer electronics, medical, instruments, commercial equipm ent and more. However, with in-depth analysis, the strongest growths are application in automobile, communication equipment, and consumer electronics. Other applications such as computers or instruments are showing signs of saturation.

With the development of technology in the electronics industry, there are more and more diversities. In the trend of requiring high-speed, miniaturized and even energy saving electronic products, some connectors have different performance requirements than before, hence increasing the development difficulties, yet at the same time, it has become the key to whether manufacturers could survive in competitions within the industry. Meanwhile, in response to the trend of developing thinner consumer electronic devices, up to date, the thickness of connectors has been reduced to within one inch. In addition to manufacturers re-layout product designs, changing component types and implementing stronger new components, the connection between components has become significantly important. Thus the connectors in thin equipment do not only need to have the ability of high-speed data transmission, but only the structural design of high pin count and fine pitch to satisfy the dual requirements for thickness and performance of the new generation electronic devices.

(4)Competition of the products

Looking at the changes in layout of the connector industry for the past 20 years, the market share of large manufacturers continues to rise. The top ten manufacturers in global connector

60

market are TE Connectivity, Amphenol, Molex, Delphi, Foxconn Technology Group, Yazaki Corporation, JST Mfg., JAE, Hirose Electric and Sumitomo Wiring Systems, Ltd.. The U.S. is the world's largest supplier of connectors, Japan ranks second. And Foxconn Technology Group is the only domestic connector manufacturer included in the top ten connector manufacturers in the world. Domestic connector manufacturers have benefited from the recent year’s transformation of applications in different fields such as electric vehicles, NetCom servers, new high-speed transmission mechanism of Type C and industrial wire harness. And the benefits have gradually shown in profitability. Although with the rise of China’s red supply chain, the status of four major monopolies, namely the U.S., Japan, South Korea and Taiwan have begun to loosen up, international giants are fighting it through expedite consolidation and adopt expansion and saving. However for smaller scaled domestic manufacturers, with technology and production capacity, only by taking advantage of Chinese manufacturers’ advantages in market and channels could they increase their competitiveness.

(3). Overview of technologies and R&D:

• (1) Technical levels of business operations

There are various types of connectors with continuously innovative products. Its technical development could be summarizing into two major outlines, one is the development of fine pitch and low profile, the other one is the development of high frequency. Under the market demand of high transmission speed and fine, compact, thin structured connectors, high frequency problems such as crosstalk noise, signal attenuation, electromagnetic interference, etc., have become the Company's development focus.

• (2) R&D Overview

In order to continuously provide high quality products to clients, the Company continue to improve comprehensively on its process standard and energy in design, manufacturing process, quality control and testing, and to achieve the goals of high growth. Sparing no efforts in developing new products, it keeps developing towards fine pitch and high-density connectors. Recently, to further satisfy the market’s demand and cooperate with high-speed connector Type-C, WLAN and automotive connectors, the Company is actively cultivating the ability to analysis and experiment high frequency connectors. In addition, to expand product lines and market scale, the Company had successfully developed the relevant connectors required for NB, servers, mobile communication industry and automotive application industry.

(3) Research and development expenses for recent years and as of the publish date of prospectus

Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	2021	2022 Q1 (Note)
R&D Costs	2,030,576	－
R&D Costs to Operating Revenues	9.49%	－

Note: As of the date of publication of the annual report, the Company has not yet issued financial statements for the first quarter of fiscal year 2022.

(4) 2021 R&D Achievements

A	Carrier for AMD's newgeneration SP5 CPUprocessors
B	New generation multi-functional high-bandwidth connection high-speed device TBT4.0 electrical connector
C	New Generation LGA 4926 Multi-Core High-Bandwidth Server CPU Chassis
D	AMD Next Generation Carrier for Desktop High Speed CPU Processors
E	AMD's new generation of SP5 server CPU holders

• (4). Long- and short-term business development plans:

• A. Marketing Strategy: Develop products according to customers' individual needs.

• B. Production Strategy: Reinforce the efficiency of production bases, reduce costs, improve instrument calibration capabilities, establish a measuring technology system and develop image measuring technology.

• C. Development Strategy: Develop towards high-frequency and high-speed transmission

• connectors fields.

• D. Financial Planning: Establish close cooperation with financial institutions, and fully make use of financing channels in capital market.

• Long-term business development plans

• A. Marketing Strategy: Head towards globalization and strengthen the LOTES brand.

• B. Production Strategy: Reinforce production process and expand automated production equipment.

• C. Development Strategy: Expand the development of connectors and related modules for the related product markets in communication industry, consumer electronics, and the automotive industry.

• D. Financial Planning: Finance through multiple channels and fully plan funds, creating a sounded

61

financial structure

B. Overview of market, production and sales:

(1). Market analysis:

1. Sales Region:

financial structure rview of market, production and sales: Market analysis: . Sales Region:	financial structure rview of market, production and sales: Market analysis: . Sales Region:	financial structure rview of market, production and sales: Market analysis: . Sales Region:
			Unit: 1,000 TWD
Year Area	2020		2021
	Amount	%	Amount	%
Domestic	1,155,725	6.68	2,370,643	11.08
Export	16,135,607	93.32	19,021,274	88.92
Total	17,291,332	100,00	21,391,917	100,00

2. Market share

With the development of downstream industries and the progress of the connector industry itself, connectors have become a bridge for the stable flow of energy and information in equipment, and the overall market size has basically maintained a steady growth. According to Bishop & Associates, the global connector market reached US$72.2 billion in 2019, up 8.2% from 2018, and is estimated to be around US$76.7 billion in 2020. It is estimated that the global market share of the Company and its subsidiaries was approximately 0.79% in 2020, and as the Company and its subsidiaries continue to expand their business, the overall operation and market share should stabilize.

• 3.Market supply and demand situation and growth in the future

• (1)Global market overview

In terms of the global market size of connectors, the application of electronic connectors (cables) has gradually expanded from 3C to high value-added fields such as artificial intelligence, fiber optic communication, industry 4.0, automotive electronics, medical, green energy, aerospace and 5G since 2016. This has led to a new wave of rapid growth in the global and Chinese connector market. According to the Foresight Industry Research Institute, the global market size of the connector industry reached US$68.8 billion in 107, with an annual growth rate of 9.21% and a CAGR of 6.79% from 2014 to 2018. The CAGR from 2014 to 2018 was 6.79%.

In terms of emerging applications, automotive manufacturers continue to upgrade the specifications/functionality of their communication and entertainment systems and safety control systems. The emerging application areas include automotive manufacturers who continue to upgrade the specifications/functions of their communication and entertainment systems and safety control systems, as well as the major connector (wire) manufacturers who are optimistic about the development of automotive applications such as self-driving cars and electric vehicles, and the higher gross margins of ADAS-related products. In addition, ADAS-related products have higher gross profit margins, and major countries have recently introduced policies to support the development of automotive connectors. Automotive electronic connectors accounted for 22% of the global sales of connectors in 2018, with a CAGR of 8% from 2014 to 2018.

According to the China Business Industry Research Institute, the automotive sector (23%) continued to account for the largest share of the global market in 2018, while communications (21%), consumer electronics (15%), industrial (12%), transportation (7%) and military (6%) were the second to sixth largest applications in 2018. The consumer electronics segment showed a significant increase in market size compared to 2017, as Type-C physical ports were confirmed as the industry standard, resulting in a significant increase in demand for converters and integrated expansion docks for related products. The global automotive market has been in a more pronounced downturn in 2019, resulting in slower demand for connectors (cables) in the automotive electronics sector. In the communications sector, it is expected that some of the 5G and WiFi 6 opportunities will begin to emerge. In the consumer electronics sector, as the integration of major high-speed interfaces begins to accelerate, and the market penetration of USB Type-C connectors and interfaces, which have become an international standard, can be effectively increased, thus increasing the sales momentum of connector (cable) products for related applications

(2)Market supply and demand situation and growth in the future

The connector market will exceed US$60 billion in 2019 and GMI estimates that it will exceed US$75 billion by 2026, representing a compound annual growth rate (CAGR) of 7.2%. Growing demand for high-speed data transmission will drive the growth of the connector industry. The global connector industry has undergone significant changes in the last decade, mainly due to the growing use of several types of connected devices. Booming telecoms, cloud computing and automotive sectors significantly increase global connector market demand, as the new pandemic, global economic slowdown and GDP declines in major economies in the first half of 2020 hinder industry growth.

Global Connectors Market Size and Annual Growth

62

==> picture [473 x 255] intentionally omitted <==

Resource: Global Market Insights

The connector industry has successfully penetrated the supply chains of major international companies such as NVIDIA, Amazon and Tesla in smart manufacturing, smart grid, cloud and Internet of Things, smart car, fiber optic and smart wearable applications, and has gained a significant position. In response to the surge in artificial intelligence (AI), high-definition video and audio streaming and online live streaming, and high-speed data computing and transmission applications, major manufacturers are actively launching new products that will drive a wave of server replacements in enterprises and data centres. As IOT applications such as automotive, industrial and medical applications continue to grow, Taiwanese manufacturers are actively developing connectors for AI artificial intelligence, e-sports market, smart manufacturing, Internet of Things, optical fiber, smart wear, self-driving cars, drones and other device applications. The continued evolution of various high frequency transmission interface technologies, the new trend of connector/sensor integration and the move towards soft electronics in connectors are expected to provide new drivers for the connector industry and bring a new wave of market growth.

Although the US-China trade friction has a directly negative impact on domestic connector manufacturers with China’s automobile market as their main sales (automotive connectors are listed in both the U.S and China’s additional tariff lists), and the mid to low-end 3C application businesses facing fierce competition from their Chinese peers, the main domestic connector (wiring) manufacturers, however, had not only prepare production bases globally in advance to soften the impact of unstable international political and economic situation, but also had effectively optimized their products dedicating in increasing the sales proportion of high niche application connector (wiring). Meanwhile, through providing localized and customized solutions and value-added services to local customers to enhance competitiveness, thus making the industry having certain support from production and marketing.

1. Competitive niche

2. A. Technical capabilities for quick tooling development

Connectors are assemblies of injection molded plastics and terminals. The processing technique of the plastic materials related closely to whether a fine pitch, high density and high temperature resistance semi-finished product can be produced. For the processing of terminals, in addition to considering the contact resistance and high pullout resistance of the metal materials, it has to be bended to a suitable angle per customers’ requests. In order to have connectors meet its required design and specifications and quality stability, the technical capabilities come from the design and development of molds and fixtures. The Company has years of experience in tooling development, terminal stamping and plastic injection molding, which enables us to quickly develop and design various molds and fixtures to cooperate into production. Therefore, despite the rapid market change and the diverse but small in quantity customer needs, the capabilities of new product development allows the Company to make immediate responses to the market change and have better timing.

B. Possession of various and numerous patents

The development of new products and the technological advancement are very important to electronic connector manufacturer, especially in the acquisition of patents to protect the company’s intellectual property rights. The Company, focusing on product research and development, has an excellent research and development team. Including internal design and development and the products developed in cooperation with customers, the Company would apply for patents for these technologies to protect the Company’s products’ competitive advantages and to avoid plagiarism from other peers within the industry. The Company currently possess over one thousand patents

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across Taiwan, China, U.S and other areas, and the number of patents is steadily increasing by year.

• C. Possessing a solid source of customers that is beneficial to other new product sales

The quality of the connector products has a decisive influence on the signal transmissions between electronic devices, thus the customers having a considerable level of quality requirements and standards for suppliers. The Company's customer base includes international manufacturers of electronic products for information and communications, making the Company’s products more international, which becomes one of the bases for establishing in the industry. Currently, the Company will not only continuing to cooperate with existing clients, but also expecting to establish a more diversified customer source from application product manufacturers in order to create a more substantial source of operating income, to set the product with more international and cross-industrial features, and to enhance strength for future market expansion.

• D. Possession of a complete production line, vertically integrating plastic molding, stamping, die and mechanical

• components.

The Company is fully functional with R&D team designing products, stamping molds, plastic molds, and injection molding, stamping of terminals and other metal structures, electroplating processing, assembling jigs, and finished product processing, and have the Company’s precision laboratory equipment test to ensure the stability of product quality. In response to the developing trend of expediting product innovation and product differentiation, currently the Company’s research and development heads toward the developing of precision connectors with fine pitch, low height, low contact resistance, resistance to high insertion force, high insertion frequency, environmental resistance and high frequency stability. Therefore, in addition to grasping opportunities to meet market demand of having lighter, thinner, shorter and more compacted products, the Company could expand the its connector product application market providing downstream customers services with a complete product line.

• E. The Company focuses on self-capacity expansion and development of new products

The Company has a strong R&D team, which can provide supports between the head office and subsidiaries according to project needs. Hence having the capabilities of rapid product development that allows product to be completed in three months from design to having a physical product; at the same time, possess the research and development abilities to design multiple new products at once. The Company also invest in precision experimental equipment to ensure the functional stability of the products. As for production capacities, the company is set up as a one-stop production; all steps can be completed within the Company, from design, development, manufacturing to shipment and other operations. Based on “Copy exactly”, the Company can also meet the customers’ needs of rapid production capacity expansion.

1. Positive and negative factors for future development

2. (1) Positive factors

3. A. In terms of industry development trend, connectors are critical components of computer and its peripheral, mobile phones, digital cameras, PDAs, and other electronic products. The recovery of global information and communication industries will prompt the growth for demand in electronic component market; therefore, the connector industry still has considerable room to grow in the future.

4. B. In terms of business strategy, in response to the pressure of cost competition, and considering the reduction of labor and material costs, the Company has adopted the model of dividing operations cooperating between Taiwan and China, thus maximized benefits by effectively using organization resources and reducing production costs.

5. C. In terms of product competitiveness, the Company has complete production lines. The current produced connector products are applicate in multiple electronic industries including information and communication, and the quality of products is recognized by major manufacturers of downstream application products.

6. (2) Negative factors

   • A. As the information industry blooms, the rapid change of related electronic product, in order to satisfy the customers’ need of diversified products; Products need to be constantly innovated, leading to the short life cycles of information products. If a company fails to launch new products in a timely manner, it will not be able to grasp market opportunities, which results in losing market competitiveness.

7. B. Global information and communication system manufacturers are becoming larger. The Company’s capital is relatively low comparing to major international manufacturers, making it difficult to carry out large-scaled new product development projects.

8. C. The wage cost of domestic labor remains high, increasing the Company's operating costs.

9. D. There are many manufacturers in the country engage in connector manufacturing. The profit are getting

10. thinner due to high product homogeneity and the fierce price cut competition from peers.

11. (3) Response to such factors

12. A. Continue to develop and improve existing products, maintain good partnership with major international manufacturer, enhance acuity to the market, fully grasp product trends, follow the growing trend of information and communication products, and to research and develop related niche products.

13. B. Strengthen strategic partnership with international manufacturers, in addition to developing new products, it is to enhance product quality and maintain customer satisfaction, and stabilize market competitiveness. Furthermore, by listing stocks, the Company may raise long-term funds in the capital market, reduce capital costs, and invest in production equipment to expand production capacity and increase research and development funds, expand the scale of operations, making the Company’s products being more competitive.

14. C.Through establishing production bases in China, the Company may engage in manufacturing connector-related products, thus to reduce production costs and reduce the impact of rising domestic wages.

15. D.In terms of design, it is focused on the particularity of products and to achieve competitive advantages in saving materials and labor.

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• (2). Usage and manufacturing processes for the main products

• Main usage

Main products are electronic connectors, providing current and signal transmission for various electronic products.

2. Manufacturing process

==> picture [302 x 127] intentionally omitted <==

----- Start of picture text -----

Product design Plastic and stamping die Plastic injection, Electroplating Quality inspection Storage and
----- End of picture text -----

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3. The Supply Status of the Major Raw Materials

The company's main raw materials for production are copper, plastic pellets and steel. Therefore, the top suppliers with highest procurement amounts are all suppliers for copper, plastic pellets and steel. These suppliers are long-term partners for years with substantial sources. Considering the quality of raw materials, pricing and cooperation may affect the change in suppliers, there is no concentration risk for material outage due to purchasing from a small number of suppliers.

1. A list of any suppliers and clients accounting for 10 percent or more of the company's total procurement (sales) amount in either of the 2 most recent fiscal years, the amounts bought from (sold to) each, the percentage of total procurement (sales) accounted for by each

2. (1) Customers accounting for 10% or more of the Company's total sales in the last two years

Unit: NT$ thousands

												Unit: NT$t
		2019				2020				2021Q1
Item	Company Name	Amount	Percentage of net sales for the year (%)	Relation With Issuer	Company Name	Amount	Percentage of net sales for the year (%)	Relation With Issuer	Company Name	Amount	Percentage of net sales for the year (%)	Relation With Issuer
1	Company A	1,860,627	10.76%	None	Company A	2,135,875	9.98%	None	－	－	－	－
2	Company B	1,179,680	6.82%	None	Company B	1,572,919	7.35%	None	－	－	－	－
3	Company C	1,132,292	6.55%	None	Company C	1,368,583	6.40%	None
	Others	13,118,733	75.87%		Others	16,314,540	76.27%		－	－	－	－
	Total	17,291,332	100%		Total	17,291,332	100%		－	－	－	－

Note: As of the date of publication of the annual report, the Company has not yet issued its financial statements for the first quarter of 2022.

(2) Suppliers accounting for 10% of the Company's total shipments for the last two years

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Unit: NT$ thousands

		2020	2020			2021	2021	2021		2022Q1	2022Q1
Item	Company Name	Amount	Percentage of net purchases for the year (%)	Relation With Issuer	Company Name	Amount	Percentage of net purchases for the year (%)	Relation With Issuer	Company Name	Amount	Percentage of net purchases for the year (%)	Relation With Issuer
1	Company A	197,915	4.06	None	Company C	267,064	3.37	None	－	－	－	－
2	Company B	155,100	3.18	None	Company A	261,088	3.29	None	－	－	－	－
3	Company C	151,774	3.11	None	Company D	253,416	3.20	None
	Others	4,370,409	93.73	﹣	Others	4,370,409	90.14	﹣	－	－	－	－
	Total	4,875,198	100.00	﹣	Total	7,927,626	100.00	﹣	－	－	－	－

Note: As of the date of publication of the annual report, the Company has not yet issued its financial statements for the first quarter of 2022.

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5.Production value for the past two years

The Company mainly receive orders while the reinvestment companies at a third area in China, Lotes Guanghou Co., Ltd and Lotes Suzhou Co., Ltd act mainly as production center 。 6. Sales value for the past two years

	Unit: thousand units/$thousand	Unit: thousand units/$thousand	Unit: thousand units/$thousand	Unit: thousand units/$thousand	Unit: thousand units/$thousand	Unit: thousand units/$thousand	Unit: thousand units/$thousand	Unit: thousand units/$thousand
Year Sales Volume Major Poducts	2020 Domestic Sales Export Quantity Quality Quantity Quality				2021
			Export		Domestic Sales		Export
		Quality	Quantity	Quality	Quantity	Quality	Quantity	Quality
Connectors & Cables	64,137	1,071,142	2,542,563	15,692,970	122,783	2,170,817	3,327,377	18,660,632
Others	1,546	84,583	10,768	442,637	3,223	199,826	10,543	360,642
Total	65,683	1,155,725	2,553,331	16,135,607	126,006	2,370,643	3,337,920	19,021,274

C. Employee information

	As of March 31,2022	As of March 31,2022	As of March 31,2022	As of March 31,2022
	**Year **	2020	2021	As of March 30, 2022
Staff Number	Management	99	104	105
	Generalstaff	5,927	7,021	7,067
	Operators	4,343	5,561	5,912
	Total	10,399	12,686	13,084
	Average Age	31.84	32.06	32.23
	Average Seniority	3.36	3.24	3.20
Education	PhD	0.05%	0.07%	0.08%
	Master	1.08%	0.86%	0.81%
	Bachelor	18.75%	17.87%	17.34%
	HighSchool	19.83%	19.27%	18.51%
	Below	60.28%	61.92%	63.25%

D.Disbursements for environmental protection

In the most recent year and as of the date of publication of the annual report, the Company’s total amount of losses and punishments due to environmental pollution, and state counter measures for the future and possible expenses: None.

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E. Labor relations

• (I)Various employee welfare measures, education, training, retirement system and implementation. And

• labor-management agreement and protection of employee rights.

• Employee welfare measures

(1) Establish an employee welfare committee in accordance with the law and implementing all employee welfare measures such as subsidy allowance for wedding, funeral, birth, injury and gifts for labor day, Dragon Boat Festival, Mid-Autumn Festival, etc.,.

• (2) Insured with labor insurance and national health insurance in accordance with the law to protect employees.

• 1. Education and training

In order to increase employee quality and working skills, reinforce the working efficiency and quality, the Company implements pre-employment guidance and training for new employees when they arrive, conduct irregular internal education and training for all employees, and select employees for external education and training programs according to their various expertise, with expectation to cultivate outstanding professionals, and then to further increase operational performances and effectively develop and utilize human resources.

1. Retirment system and implementation

The Company has established employee retirement measures in accordance with the “Labor Standards Act”. According to the retirement measures, the pension is calculated based on the employees’ years of service and the average salary of the six months before retirement. In accordance with regulations, the Company set aside a monthly labor retirement reserve and has it managed by the Supervisory Committee of Business Entities’ Labor Retirement Reserve, and deposits it into the Central Trust of China in the name of the committee. Since the implementation of "Labor Pension Act" on July 1st, 2005, the Company also set aside a 6% pension for employees applied to the Act.

4.Labor-management agreement and protection of employee rights

The company has always upheld the concept of labor-management harmony. All operations are conducted in accordance with the regulations of the “Labor Standards Act” with regular labor-management meetings held. Therefore, the internal communication channels are open and so far no labor disputes occurred.

(2)In the most recent year and as of the date of publication of the annual report, the Company’s losses due to labor disputes, and disclose of current and the possible future estimated amounts and measures: None.

F. IT security management

• (1)Describe the risk management framework for IT and communications security, IT and communications security policies, specific management plans and resources devoted to IT and communications security management. 1.Risk management framework for IT security

The IT security department of the Company has four IT supervisors and several professional IT personnel, who are responsible for formulating internal IT security policies, planning and implementing IT security operations and promoting and implementing IT security policies, and reporting regularly to the Board of Directors on the Company's IT security governance.

The Company has an auditor to oversee the supervision of IT security, who is responsible for auditing and supervising the implementation of internal IT security. If deficiencies are found, the audited unit is immediately requested to propose relevant improvement plans and specific actions, and the effectiveness of the improvements is regularly tracked to reduce internal IT security risks.

Organizational operation mode - PDCA (Plan-Do-Check-Act) cycle management is adopted to ensure the achievement of reliability targets and continuous improvement.

• 2.IT Security Policy

To enhance IT security management, the Company's IT Technology Department promotes internal control of IT security risks and is responsible for the management, supervision and verification of the Company's IT security operations...etc. The audit reports regularly to the Board of Directors on the status of IT security governance review. It covers the following four areas.

• (1)IT Security Technology: Introduction of IT security management equipment and deepening of multi-level and in-depth defence.

• (2)Systems and practices: To establish company IT security policies and IT security procedures, and to regulate the IT security behaviour of personnel.

• (3)Employee Awareness: Conduct IT security education and drills to raise the awareness of all employees on IT security.

(4)Data backup management: Respect the 3-2-1 backup principle for data backup.

3.Specific Management Solutions

• (1)IT Security Technology: In order to prevent various external IT security threats, we have built various IT security systems to enhance the overall security of our IT environment. In addition, regular vulnerability scans are conducted on hosts and personnel IT security management measures are implemented.

• (2)Systems: The company's IT security policy must be followed, and necessary system updates, anti-virus software installation, password non-sharing and regular updates must be carried out to effectively block computer viruses, Trojan horses and malicious programs to provide first-line security protection.

• (3)Staff training: Regular and irregular training/drills on IT security, creation of rewards and punishments for internal control of risk behaviours, and periodic announcements according to current events to promote awareness of IT security among all staff.

• (4)Data backup management: at least 3 copies of important data are backed up; 2 different backup methods are

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used, one of which is stored in an off-site server room.

4.Investing resources in IT security management

In order to implement the four major IT security policies, the following resources are invested.

• (1)Network hardware equipment such as firewall, mail anti-virus, spam filtering, Internet behaviour analysis, network managed hubs, etc.

• (2)Software systems such as endpoint protection system, backup management software, VPN authentication and encryption software, etc.

• (3)Invest in Human resources such as: daily system status checks, weekly backups and off-site storage of backup media, at least two IT security education courses per year, annual system disaster recovery exercises, annual internal audits of IT cycles, audits by accountants, etc.

• (4)Invest in IT security personnel: One IT security supervisor and two IT security personnel, responsible for IT security structure design, IT security maintenance and monitoring, IT security incident response and investigation, IT security policy review and revision, the IT security supervisor reports to the board of directors at least once a year.

• (2)To set out the losses suffered, the possible impact and the measures taken in response to major information and communications security incidents in the most recent year and up to the date of printing of the annual report, and to state the facts that cannot be reasonably estimated if they cannot be reasonably estimated.

• The Company has not suffered any loss as a result of an information and communications security incident up to the date of publication of the annual report.

G. Important contracts

Nature	Contracting Parties	Contract start/end date	Major Content	Restrictive Clauses
Borrowing Agreement	E.SUN Commercial Bank Ltd.	2021.07.20~2022.07.20	Credit line	None
Borrowing Agreement	Bank Sinopac Co., Ltd.	2021.06.11~2022.06.30	Credit line	None
Borrowing Agreement	CTBC Bank Co., Ltd.	2021.08.31~2022.08.31	Credit line	None
Borrowing Agreement	Hua Nan Commercial Bank Ltd.	2021.10.29~2022.10.29	Credit line	None
Borrowing Agreement	Mega International Commercial Bank Co.,Ltd.	2021.07.22~2022.07.21	Credit line	None

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VI. Overview of Financial Status

A. A condensed balance sheet and statement of comprehensive income for the last five years with the name of the accountant and his or her audit opinion

(1) Condensed balance sheet

1. Adoption of International Financial Reporting Standards (IFRS) - Consolidated Statements

Year Item	Year Item	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial information as of March 31, 2022 (Note)
		2017	2018	2019	2020	2021
Current assets		9,566,989	11,400,712	13,054,559	13,054,559	16,959,937	－
Property, Plant and Equipment		3,350,160	3,514,714	4,495,974	4,495,974	6,882,186	－
Intangible assets		59,527	99,789	155,510	155,510	205,584	－
Other assets		473,115	388,701	661,820	661,820	822,486	－
Total assets		13,790,208	16,280,192	19,282,895	19,282,895	26,419,391	－
Current liabilities	Before distribution	3,277,487	3,876,478	3,630,746	4,580,880	7,004,306	－
	After distribution	3,791615	4,776,736	4,717,264	5,957,136	Not yet distributed	－
Non-current liabilities		42,248	104,221	222,456	222,456	1,360,381	－
Total liabilities	Before distribution	3,321,469	3,918,726	3,734,967	4,803,336	8,364,687	－
	After distribution	3,835,597	4,818,984	4,821,485	6,179,952	Not yet distributed	－
Equity attributable to shareholders of the parent		9,506,158	11,815,326	13,499,198	13,499,198	16,682,481	－
Capital stock		934,779	1,034,779	1,034,779	1,034,779	1,059,779	－
Capital surplus		2,466,109	3,959,560	3,958,247	3,958,247	5,283,698	－
Retained earnings	Before distribution	5,195,871	6,296,652	7,471,519	9,101,144	11,200,170	－
	After distribution	4,681,743	5,396,394	6,385,001	7,724,888	Not yet distributed	－
Other equity interest		(317,020)	(650,532)	(594,972)	(594,972)	(682,333)	－
Treasury stock		0	0	0	0	0	－
Non-controlling interest		365,324	729,899	980,361	980,361	1,192,223	－
Total equity	Before distribution	8,431,789	9,871,482	12,545,225	14,479,559	18,054,704	－
	After distribution	7,917,661	8,971,224	11,458,707	13,103,303	Not yet distributed	－

Note: Quarterly report for the first quarter has not yet been issued as at the date of publication.

2.Adoption of International Financial Reporting Standards (IFRS) - Individual Statements

Year Item	Year Item	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years
		2017	2018	2019	2020	2021
Current assets		3,999,731	4,456,296	5,476,170	5,643,845	7,648,068
Property, Plant and Equipment		50,675	51,342	63,428	58,276	58,354
Intangible assets		688	30,628	50,937	97,583	82,534
Other assets		97,117	6,027	15,462	6,027	9,349
Total assets		11,306,203	12,734,745	14,830,921	16,395,041	20,802,281
Current liabilities	Before distribution	2,977,029	3,187,052	2,972,923	2,845,841	2,975,871

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Item	Year	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years
		2017	2018	2019	2020	2021
	After distribution	3,491,157	4,087,310	4,059,441	4,222,097	Not yet allocated
Non-current liabilities		42,638	41,535	42,672	50,002	963,929
Total liabilities	Before distribution	3,020,587	3,228,587	3,015,595	2,895,843	3,939,800
	After distribution	3,534,715	4,128,845	4,102,113	4,272,099	Not yet allocated
Equity attributable t	o parent	8,285,616	9,506,158	11,815,326	13,499,198	16,862,481
shareholders of the
Capitalstock		934,779	934,779	1,034,779	1,034,779	1,059,779
Capitalsurplus		2,410,168	2,466,109	3,959,560	3,958,247	5,283,698
Retained earnings	Before distribution	5,195,871	6,296,652	7,471,519	9,101,144	11,200,170
	After distribution	4,681,743	5,396,394	6,385,001	7,724,888	Not yet allocated
Other equity interest		(255,202)	(317,020)	(650,532)	(594,972)	(682,333)
Treasury stock		0	0	0	0	0
Non-controlling interest		0	0	0	0	0
Total equity	Before distribution	8,285,616	9,506,158	11,815,326	13,499,198	16,862,481
	After distribution	7,744,488	8,605,900	10,728,808	12,122,942	Not yet allocated

• (2) Condensed statement of comprehensive income

• Adoption of International Financial Reporting Standards (IFRS) - Consolidated Statements

Year Item	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Information as of March 31, 2022 (Note)
	2017	2018	2019	2020	2021
Operatingrevenue	10,482,763	13,311,518	15,088,872	17,291,332	21,391,917	－
Gross profit	3,390,515	4,348,869	5,467,910	6,930,195	8,557,306	－
Operating profit or loss	1,219,583	1,982,440	2,750,624	3,707,652	4,359,267	－
Non-operating income and expenses	32,820	171,857	81,137	(37,650)	180,931	－
Profit before income tax	1,252,403	2,154,297	2,831,761	3,670,002	4,540,158	－
Current net profit from continuing operations	982,732	1,708,299	2,144,468	2,835,589	3,519,031	－
Loss from discontinued operations	0	0	0	0	0	－
Net profit (loss)	982,732	1,708,299	2,144,468	2,835,589	3,519,031	－
Other comprehensive income (loss) ( income after tax)	(219,943)	(56,310)	(337,918)	42,913	(84,179)	－
Total comprehensive income (loss)	762,789	1,651,989	1,806,550	2,878,502	3,434,852	－
Net profit attributable to owners of the company	956,301	1,608,567	2,076,043	2,732,361	3,472,201	－
Net profit attributable to non-controlling interests	26,907	99,732	68,425	103,228	46,830	－
Comprehensive income attributable to owners of the company	735,882	1,553,091	1,741,613	2,771,703	3,387,921	－
Comprehensive income attributable to non-controllinginterests	26,907	98,898	64,937	106,799	46,931	－
Earningsper share	10.23	17.21	20.11	26.41	33.32	－

Note: Quarterly report for the first quarter has not yet been issued as at the date of publication.

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2.Adoption of International Financial Reporting Standards (IFRS) - Individual Statements

Unit: NT$ thousands

Year Item	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years
	2017	2018	2019	2020	2021
Operatingrevenue	7,908,666	8,731,882	9,968,334	11,362,435	14,151,210
Gross profit	1,216,311	1,385,837	1,805,548	2,544,800	2,739,782
Operating profit or loss	537,905	822,567	1,230,782	1,884,003	1,986,941
Non-operating income and expenses	537,215	981,503	1,126,841	1,255,369	1,953,510
Profit before income tax	1,075,120	1,804,070	2,357,623	3,139,372	3,940,451
Current net profit from continuing operations	956,301	1,608,567	2,076,043	2,732,361	3,472,201
Loss from discontinued operations	－	－	－	－	－
Net profit (loss)	956,301	1,608,567	2,076,043	2,732,361	3,472,201
Other comprehensive income (loss) ( income after tax)	(220,419)	(55,476)	(334,430)	39,342	(84,280
Total comprehensive income (loss)	735,882	1,553,091	1,741,613	2,771,703	3,387,921
Earningsper share	10.23	17.21	20.11	26.41	33.32

(3) Name of the CPAs of the last five years and their audit opinion

Year	Accounting Firm	Names of CPAs	Audit Opinion
2017	KPMG Taiwan	Chen, Fu-Wei, Chung, Tan-Tan	Unqualified opinion
2018	KPMG Taiwan	Chen, Fu-Wei, Chung, Tan-Tan	Unqualified opinion
2019	KPMG Taiwan	Chen, Fu-Wei, Chung, Tan-Tan	Unqualified opinion
2020	KPMG Taiwan	Li Fung-Hui, Chung, Tan-Tan	Unqualified opinion
2021	KPMG Taiwan	Li Fung-Hui, Chung, Tan-Tan	Unqualified opinion

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B. Five-year financial analysis

1. Adoption of International Financial Reporting Standards (IFRS) - Consolidated Statements

Item	Year	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis as of March 31, 2022 (Note)
		2017	2018	2019	2020	2021
Financial structure%	Debt ratio (%)	28.25	28.41	22.94	24.90	31,66
	Long-term capital to property, plant and equipment ratio(%)	289.65	295.91	359.89	327.00	282.10
Solvency%	Current ratio (%)	239.92	246.79	314.00	284.97	242.13
	Quick ratio (%)	183.73	186.98	255.79	227.75	181.67
	Interest protection multiples(times)	21,837.09	11,765.02	12,568.67	19,821.65	16,140.83
Operating Ability	Receivable turnover ratio (times)	2.60	2.77	2.67	2.68	2.72
	Average collection period	140	132	136	136	134
	Inventory turnover ratio (times)	3.66	3.94	4.06	4.06	3.50
	Payable turnover ratio (times)	4.48	5.12	5.21	4.70	4.99
	Average days in sales	99	93	90	90	104
	Property, plant and equipment turnover ratio (times)	3.87	4.27	4.39	4.31	3.76
	Total assets turnover ratio (times)	0.94	1.04	1.00	0.97	0.93
Profitability	Return on assets (%)	8.64	12.71	13.92	15.44	15.29
	Return on equity (%)	11.81	18.08	19.47	21.58	22.87
	Pre-tax income to paid-in capital ratio (%) (note 7)	133.97	230.46	273.65	354.66	428.40
	Net profit ratio (%)	9.12	12.08	13.75	15.80	16.23
	Earnings per share (NT$)	10.23	17.21	20.11	26.41	33.32
Cash flow	Cash flow ratio (%)	31.30	38.90	92.53	75.72	38.40
	Cash flow adequacy ratio (%)	88.74	93.98	104.28	95.50	75.53
	Cash reinvestment ratio (%)	6.02	7.99	16.14	14.16	5.89
Leverage	Operating leverage	3.61	3.07	2.68	2.49	2.89
	Financial leverage	1.00	1.01	1.01	1.01	1.01
Please explain the reasons for the changes in the financial ratios in the last two years. (Analysis may be waived if the change is less than 20%) 1.Debt to assets ratio: The increase in debt ratio in 2021 was due to short-term borrowings and the Company's conversion of corporate bonds. 2.Quick Ratio: The decline in quick ratio in 2021 was mainly due to the increase in short-term borrowings, resulting in the increase in current liabilities exceeding the increase in current assets. 3.Net income before tax as a percentage of paid-in capital: The significant increase in net income before tax as a percentage of paid-in capital in 2021 was mainly due to a significant increase in profit in 2020, but only a small increase in paid-in capital. 4.Earnings per share: The significant increase in earnings per share was mainly due to the significant increase in earnings but no change in paid-in capital. 5.Cash flow ratio: The decline in cash flow ratio in 2021 was mainly due to a decrease in cash flow from operating activities and a significant increase in current liabilities 6.The decline in both the cash flow equivalency ratio and the cash reinvestment ratio in 2021 was mainly due to a decrease in cash flow from operatingactivities and a significant increase in capital expenditure onpropertyandplant.

Note: Quarterly report for the first quarter has not yet been issued as at the date of publication.

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2.Adoption of International Financial Reporting Standards (IFRS) - Individual Statements

Item	Year	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years
		2017	2018	2019	2020	2021
Financial structure%	Debt ratio (%)	26.72	25.35	20.33	17.66	18.94
	Long-term capital to property, plant and equipment ratio (%)	16,436.46	18,596.26	18,695. 21	23,250.05	30,548.74
Solvency%	Current ratio (%)	134.35	139.83	184.20	198.32	257.00
	Quick ratio (%)	118.35	123.37	164.20	173.19	223.45
	Interest protection multiples (times)	109,249	49,964	398,347	221,183	58,503
Operating Ability	Receivable turnover ratio(times)	2.60	2.63	2.68	2.76	2.78
	Average collectionperiod	140	139	136	132	131.29
	Inventoryturnover ratio(times)	12.80	14.10	14.18	12.90	12.56
	Payable turnover ratio(times)	2.91	3.52	3.80	4.06	6.37
	Average daysinsales	28	25	26	28	29
	Property, plant and equipment turnover ratio(times)	155	171	173	186	242
	Total assets turnover ratio(times)	0.72	0.73	0.72	0.73	0.76
Profitability	Return on assets(%)	8.69	13.41	15.07	17.51	18.70
	Return on equity (%)	11.82	18.08	19.47	21.59	22.87
	Pre-tax income to paid-in capital ratio (%)	115.01	192.99	227.84	303.39	371.82
	Net profitratio (%)	12.09	18.42	20.83	24.05	24.54
	Earningsper share(NT$)	10.23	17.21	20.11	26.41	33.32
Cash flow	Cash flow ratio (%)	6.05	1.78	32.31	28.97	(21.20)
	Cash flow adequacy ratio (%)	75.67	60.28	53.40	46.51	24.69
	Cash reinvestment ratio (%)	(2.32)	(4.78)	0.51	(1.93)	(11.26)
Leverage	Operating leverage	1.40	1.30	1.21	1.16	1.18
	Financial leverage	1.00	1.00	1.00	1.00	1.00
Please explain the reasons for the changes in the financial ratios in the last two years. (Analysis may be waived if the change is less than 20%) 1. Ratio of long-term capital to property, plant and equipment: The increase in the ratio of long-term capital to property, plant and equipment was mainly due to the significant increase in profitability in fiscal 2021, which resulted in the increase in long-term capital being greater than the increase in property, plant and equipment. 2. Interest coverage ratio: The decrease in interest coverage ratio was mainly due to the increase in interest expense exceeding the increase in profitability. 3.Net income before tax to paid-in capital ratio: The significant increase in net income before tax to paid-in capital ratio was mainly due to the significant increase in earnings but no change in paid-in capital. 4.Turnover of property, plant and equipment (times): This is mainly due to the fact that the increase in sales revenue in 2021 was greater than the increase in property, plant and equipment. 5,Net income before tax as a percentage of paid-in capital: The significant increase in net income before tax as a percentage of paid-in capital in 2021 was mainly due to the significant increase in profit in 2021 while paid-in capital remained unchanged. 6. Earnings per share: The significant increase in earnings per share was mainly due to the significant increase in earnings but no change in paid-in capital. 7.Cash flow ratio: The negative cash flow ratio in 2021 was mainly due to the negative cash flow from operating activities in 2021. 8.Cash Flow Fair Ratio: The decline in the cash flow ratio in 2021 was mainly due to a decline in cash flow from operating activities in the last five years and an increase in (capital expenditures + increase in inventories + cash dividends) in the last five years. 9.Cash reinvestment ratio: The cash reinvestment ratio turned negative in 2021 mainly because the net cash inflow from operatingactivities was smaller than the cash dividendspaid in 2021.

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1. Financial Structure

2. (1) Debt ratio = total liabilities / total assets

3. (2) Long-term capital to property, plant and equipment ratio = (total equity + non-current liabilities)/net property, plant and equipment

4. Solvency

5. (1) Current ratio = current assets/current liabilities

6. (2) Quick ratio = (current assets – inventory – prepaid expense) / current liabilities

7. (3) Interest protection multiples = net income before income tax and interest expense / current interest expense

8. Operating Ability

9. (1) Receivables (including accounts receivable and notes receivable arising from business operations) turnover ratio = net sales / average receivables (including accounts receivable and notes receivable arising from business operations) for each period

10. (2) Average collection period = 365 / receivables turnover ratio

11. (3) Inventory turnover ratio = cost of goods sold / average inventory amount

12. (4) Payable (including accounts payable and business-related notes payable) turnover ratio = cost of goods

    • sold / average payable balance of the period (including accounts payable and business-related notes payable)

13. (5) Average days in sale = 365 / inventory turnover rate

14. (6) Property, plant, and equipment (PP&E) turnover ratio = net sales/average PP&E

15. (7) Total asset turnover ratio = net sales / average total assets

16. Profitability

17. (1) Return on assets = (net income + interest expense x (1– tax rate)) / average total assets

18. (2) Return on equity = net income after tax/ average total equity

19. (3) Net profit ratio = net income / net sales

20. (4) Earnings (loss) per share = (income or loss attributable to owners of parent company – dividends on Preferred shares) / weighted average number of issued shares (Note 4)

21. Cash flow

22. (1) Cash flow ratio = net operating cash flow / current liabilities

23. (2) Net cash flow adequacy ratio = net operating cash flow in last 5 years / (capital expenditures + Inventory increase + cash dividend) in last 5 years

24. (3) Cash reinvestment ratio = (Net operating cash flow – cash dividend) / (gross property, plant and equipment + long-term investment + other non-current assets + working capital) (Note 5)

25. Leverage

26. (1) Operating leverage = (Net operating revenue - variable operating change cost and expense) / Operating income (Note 6)

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3.2021 Audit Report of Supervisors for the Financial Statements

Lotes Co., Ltd. Audit Report of Audit Committee

The Board of Directors had prepared and delivered the 2021 Business Report, Statement of Earnings Distribution and Financial Statements (including consolidated financial statements). The audit of the financial statements was completed by accountants LI, FUNG-HUI and CHUNG, TAN-TAN at KPMG Taiwan, and a auditor's report was issued. The audit of the aforementioned reports and statements delivered by the Board of Directors were conducted by the supervisors who found no inconsistency. The audit report was issued in accordance with Article 219 of the Company Act and Article 14-4 of Security Transaction Act.

Yours sincerely,

2022 Shareholders General Meeting of Lotes Co., Ltd.

Audit Committee Convenor: WU, CHANG-HSIU

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4. 2021 Financial Statements and Independent Auditor’s Report

Independent Auditor’s Report

To the Board of Directors of Lotes Co., Ltd.:

Audit opinion

We have audited the Balance Sheet of Lotes Co., Ltd. (hereinafter referred to as Lotes) as of December 31, 2021 and 2020, the Statement of Comprehensive Income as of January 1 to December 31, 2021 and 2020 as well as the Statement of Changes in Equity, Statement of Cash Flows and the Notes to Individual Financial Statement (including important accounting policies summary).

In our opinions, the compilation of the above individual financial statements present fairly, in all material respects, of the financial status of December 31, 2021 and 2020 in Lotes and the financial performance and consolidated cash flow of January 1 to December 31, 2021 and 2020 prepared according to Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis of the audit opinions

The audit was conducted by us in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS). Our responsibilities under these standards will be further explained in the responsibility paragraph of the accountant’s audit on the parent company only financial statements. The personnel regulated by independence at the accounting firm that our accountants work with have been managed according to the code of professional ethics to maintain independence from Lotes as well as perform other responsibilities addressed on the regulation. Based on the audit results of us, we believe we have obtained sufficient and appropriate auditing evidence as the basis to express our audit opinions.

Key audit matters

Key audit matters refer to the most important matters on the audits to Lotes’s parent company only financial statements of fiscal year 2021 based on the professional judgment of our accountants. The matters have been responded on the whole audited parent company only financial statements and during the process of the expression of the audit opinions. There, our accountants will not express opinions separately towards the matters. Based on the judgment of the accountants, the following key audit matters that should be communicated on the audit report are as follows:

I. Recognition of income

Please refer to Note IV (15) to the parent company only financial statements for the accounting policy in terms of income recognition. Please refer to Note VI (13) to the parent company only financial statements for the refund liability. Please refer to Note VI (21) to the parent company only financial statements for details about income.

Description of the key audit matters:

The operating income is the most critical factor when determining the operational performance of Lotes Co., Ltd. Users of the statements are cautiously concerned about the performance of the operating income. In response to the market conditions and business needs, discounts were provided for parts of the sales of goods agreed with the customers. Based on the agreements with the customers, the management would estimate the refund liability and include it as a deduction of operating income. Thus, the income recognition evaluation is one of the fundamental evaluation items for accountants in the execution of financial report audit for Lotes Co., Ltd.

Corresponding audit procedures:

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the relevant control procedures and methods in the estimation of refund liabilities in terms of the sales procedure and the effectiveness of the design and execution of the control procedure. Regarding the sampling testing for sales close to the balance sheet date, external certification documents were reviewed to assess the adequacy of the income recognition timings. The management’s method to estimate and list refund liabilities were also obtained to assess whether the evaluation is based on the agreed conditions with customers. The adequacy of the refund liability estimate

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was analyzed with the actual situation afterward.

II. Evaluation of inventory

Please refer to Note IV (7) for the accounting policy of inventory evaluation. Please refer to Note V in the parent company only financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note VI (4) in the parent company only financial statements for the information on the losses from the falling price of inventory. Description of the key audit matters:

Due to the impacts of rapid changes in the market demand and the development of production technology, the existing products are at risk to become outdated inventory or non-compliant with market demand. Parts of the inventory may become obsolete or have the market prices dropped. Thus, the inventory evaluation is one of the fundamental evaluation items for the accountants in the execution of financial report audit for Lotes Co., Ltd.

Corresponding audit procedure:

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the basis and methods used by the management to assess the net realizable value of inventory. Review and audit were conducted in terms of the data used by the management as the basis and to estimate the net realizable value, and an evaluation was conducted on the estimated sales price to the latest sales record by sampling. To evaluate the adequacy of the drop in prices, the adequacy of the inventory aging report was checked, and the changes in the inventory aging of each period were analyzed.

Responsibility from management level and governing unit towards the parent company only financial

statements

Management level’s responsibility is to prepare the parent company only financial statements present fairly according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and to maintain necessary internal control related to the preparation of the parent company only financial statements in order to ensure there is no major untrue expression on the financial statements due to fraud or error.

When preparing the parent company only financial statements, the responsibility of management level also includes evaluating Lotes’s capability of continuous operation, disclosure of relevant matters and the application of continuous operation accounting model unless the management level intends to liquidate Lotes or suspend its business operation or there is no alternative practical and feasible solution other than liquidation or business suspension.

The governing unit (including the audit committee) at Lotes is responsible for supervising the process of financial reports.

Responsibility of accountants’ audit on the parent company only financial statements

The purpose of the parent company only financial statements audited by our accountants is to obtain reasonable assurance on whether the significant untrue expression exists on the whole parent company only financial statements due to fraud or error as well as issue the audit report. The reasonable assurance is the high certainty; however, it will not be able to guarantee that the significant untrue expression will definitely be able to be detected by generally accepted auditing standards, and the untrue expression might be caused from fraud or error. It is regarded as with significance if the individual amount or the aggregation number of the untrue expression can reasonably predict that it will affect the economic decisions made by the users of the parent company only financial statements.

When we conduct the audit according to generally accepted auditing standards, we use professional judgment and maintain our professional suspicion. We also executed the following tasks:

1. Identifying and evaluating the risk of major untrue expression on the parent company only financial statements due to fraud or error; designing and implementing proper responding strategies towards the risk evaluated; and obtaining sufficient and appropriate audit evidence as the basis of audit opinions. Due to fraud might be involving with collusion, counterfeiting, malicious omission untrue declaration, or going out of the internal control, the risk of not detecting the major untrue expression due to fraud will be higher than that due to error.

2. Obtaining necessary understanding of internal control related to audit in order to design proper audit procedure under the situation of the case. However, its purpose is not to express opinion toward the effectiveness of the internal control in Lotes.

3. Evaluating the adequacy of the accounting policies used by the management level and the rationality of the

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accounting evaluation and relevant disclosure concluded.

1. Based on the audit evidence obtained, conclusion towards the appropriateness of continuous operation accounting basis that the management level adopts and the existence of major uncertainty on events or situations with major concerns affecting Lotes’s capability in continuous operation are made. If we believe major uncertainty existed on the event or situation, we must remind the users of parent company only financial statements on the audit report to pay attention on the relevant disclosure or modify audit opinion when the disclosure is not appropriate. The conclusion that we made is based on the audit evidence obtained up to the audit report day, but future events or situations might cause Lotes not capable in continuous operation.

2. Evaluating the overall expression, structure and content of the parent company only financial statements (including relevant notes) as well as whether the parent company only financial statements present fairly, in all material respects, relevant transaction and events.

3. Obtaining sufficient and appropriated audit evidence of the financial information from the investee companies accounted for using equity method as well as express opinions towards the parent company only financial statements. We are in charge of the directing, supervision and execution on the audit cases as well as concluding audit opinions towards the parent company only financial statements of Lotes.

The communication between us and the governing unit includes the audit scope and time planned and major audit findings (including the significant defects on the internal control identified during the auditing process).

We have also provided information to the governing unit that the personnel of the firm—under which our CPAs are working—who are subject to independence requirements have complied with the statement of independence in the CPA code of professional ethics and communicated to the governing unit all relationships and other matters (including relevant safeguards) that may be considered to affect the independence of CPAs.

We determined the key audit matters that we would like to execute on Lotes’s parent company only financial statements for fiscal year 2021 from the communication with the governing unit. We clearly stated the related matters on the audit report unless it is the specific matter that is not allowed to be disclosed to the public according to laws, or under a very rare situation that we decided not to communicate specific matters on the audit report because we can reasonably anticipate the negative influence generated by the communication will be greater than the public interests increased.

KPMG Taiwan

CPAs: Competent Authority of Securities CHIN-KUAN-CHENG-SHEN-TZU Approval Certificate No. : No. 1000011652 (88) TAI-TSAI-CHENG (VI) No. 18311 March 21, 2022

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Lotes Co., Ltd.

Balance Sheet

December 31, 2021 and 2020

Unit: NT$ 1,000

Assets Current assets: 1100 Cash and cash equivalents(Note VI (1) and (24)) 1110 Financial assets measured at FVTPL - current ((Note VI (2) and (24)) 1150 Net notes receivable((Note VI (3) and (24)) 1170 Net accounts receivable((Note VI (3) and (24)) 1181 Accounts receivable - related parties ((Note VI (3), (24) and VII) 1200 Other receivables((Note VI (3) and (24)) 1210 Other accounts receivable - related parties ((Note VI (3), (24) and VII) 130X Net inventory((Note VI (4)) 1410 Advance payment Non-current assets: 1510 Financial assets measured at FVTPL - non-current ((Note VI (2), (11) and (24)) 1517 Financial assets measured at FVTOCI - non-current ((Note VI (2) and (24)) 1550 Investments accounted for using the equity method ((Note VI (5) and XIII) 1600 Property, plant and equipment((Note VI (6) and VIII) 1755 Right-of-use assets((Note VI (7)) 1760 Net investment property((Note VI (8) and (24)) 1780 Intangible assets((Note VI (9)) 1840 Deferred tax assets((Note VI (17)) 1900 Other non-current assets Total of assets	Dec. 31, 2021 Amount % $ 779,913 4 - - 1,911 - 5,812,399 28 32,627 - 22,484 - 160 - 995,854 5 2,720 -	Dec. 31, 2020 Amount % 497,302 3 2,080 - 2,485 - 4,304,076 26 13,012 - 19,702 - 90,161 1 710,477 4 4,550 - 5,643,845 34 - - - - 10,225,811 63 58,276 - - - 299,927 2 97,583 1 63,572 - 6,027 - 10,751,196 66 16,395,041 100 Liabilities and equity Current liabilities: 2100 Short-term loans ((Note VI (10), (24), (27), VIII and IX) 2130 Contract liabilities - current ((Note VI (21)) 2150 Notes payable((Note VI (24)) 2170 Accounts payable((Note VI (24)) 2180 Accounts payable - related parties ((Note VI (24) and VII) 2200 Other payables((Note VI (24)) 2220 Other payables - related parties ((Note VI (24) and VII) 2230 Income tax liabilities for the period((Note VI (17)) 2280 Lease liabilities - current((Note VI (12), (24) and (27)) 2365 Refund liabilities - current ((Note VI (13)) 2300 Other current liabilities Non-current liabilities: 2530 Bonds payable((Note VI (11), (24) and (27)) 2550 Provisions - non-current ((Note VI (14) and (16)) 2570 Deferred income tax liabilities ((Note VI (17)) 2600 Other non-current liabilities Total of liabilities Equity attributable to owners of parent: Share capital: 3110 Capital – common stock ((Note VI (18)) 3130 Certificates of bond-to-stock conversion ((Note VI (18)) 3200 Capital reserves((Note VI (11), (18) and (19)) 3300 Retained earnings((Note VI (18)) 3400 Other equity ((Note VI (18)) Total of equity Total of liabilities and equity	Dec. 31, 2021		Dec. 31, 2020 Amount % - - 21,392 - 2,712 - 11,421 - 2,034,411 12 299,122 2 2,092 - 305,058 2 - - 161,767 1 7,866 -
	7,648,068 37
	3,370 - 9,500 - 12,624,489 61 58,354 - 59 - 300,256 2 82,534 - 66,302 - 9,349 -		2,975,871 14		2,845,841 17
			911,927 5 45,220 - 6,038 - 744 -		- - 49,258 - - - 744 -
			963,929 5		50,002 -
			3,939,800 19		2,895,843 17
			1,059,779 5 1,167 - 5,283,698 25 11,200,170 54 (682,333) (3)		1,034,779 6 - - 3,958,247 24 9,101,144 56 (594,972) (3)
	13,154,213 63
	$ 20,802,281 100		16,862,481 81		13,499,198 83
			$ 20,802,281 100		16,395,041 100

(Please read the Notes to the Parent Company Only Financial Statements) Manager: HO, TE-YU

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

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Lotes Co., Ltd.

Statement of Comprehensive Income

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

4000 Operating revenue((Note VI (13), (21) and VII) 5000 Operating cost((Note VI (4), (9), VII and XII) Gross profit Operating expense((Note VI (9), (12), (15). (16), (24), VII and XII): 6100 Promotion expense 6200 Administration expense 6300 R&D expense 6450 Expected credit impairment profit/loss Total operating expense Net operating profit Non-operating revenue/expense((Note VI (22)): 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Financial costs 7055 Expected credit gain (loss) 7070 Share of profit or loss of subsidiaries, associates and joint ventures accounted for using equity method Total non-operating revenue/expense Net profit before tax from continuing operations 7950 Less: Income tax expense((Note VI (17)) Net profit for the period 8300 Other comprehensive income: 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurement of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at FVTOCI 8330 Share of the other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method - items which were not reclassified into profit or loss 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Total components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation 8399 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss Total components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income for the period (net) Total other comprehensive income for the period Basic earnings per share (Unit: NT$) (Note VI (23)) Diluted earnings per share (Unit: NT$) (Note VI (23))	2021			2020	% 100 78
	Amount $ 14,151,210 11,411,428	%		Amount 11,362,435 8,817,635
		100 81
	2,739,782	19		2,544,800	22
	389,708 308,977 55,862 (1,706)	3 2 - -		312,675 295,923 53,509 (1,310)	3 3 - -
	752,841	5		660,797	6
	1,986,941	14		1,884,003	16
	1,746 99,908 (45,618) (6,747) (1,037) 1,905,258	- 1 - - - 13		10,165 62,514 (111,250) (1,420) 1,317 1,294,043	- 1 (1) - - 11
	1,953,510	14		1,255,369	11
	3,940,451 468,250	28 3		3,139,372 407,011	27 4
	3,472,201	25		2,732,361	23
	3,851 (4,900) (359) 770	- - - -		(7,598) - 403 (1,520)	- - - -
	(2,178)	-		(5,675)	-
	(82,102) -	(1) -		45,017 -	- -
	(82,102)	(1)		45,017	-
	(84,280)	(1)		39,342	-
	$ 3,387,921	24		2,771,703	23
	$	33.32			26.41
	$	32.69			26.34

(Please read the Notes to the Parent Company Only Financial Statements) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU

Accounting Manager: LIU, HSIN-HSIA

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Lotes Co., Ltd.

Statement of Change in Equity

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

Balance on January 1, 2020 Net profit for the period Other comprehensive income for the period Total other comprehensive income for the period Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of common stock Other changes in capital reserves: Changes in equity of subsidiaries, associates and joint ventures accounted for using equity method Disposal of equity instruments measured at FVTOCI Balance on December 31, 2020 Net profit for the period Other comprehensive income for the period Total other comprehensive income for the period Appropriation and distribution of retained earnings: Legal reserve appropriated Reversal on special reserve Cash dividends of common stock Other changes in capital reserves: Issuance of stock options for convertible bonds Changes in equity of subsidiaries, associates and joint ventures accounted for using equity method Compensation expense for employee stock options Cash capital increase Conversion of convertible bonds Balance on December 31, 2021		Share capital		Capital reserves		Retained earnings		Other equityitems	Other equityitems	Total equity 11,815,326 2,732,361 39,342
								Exchange difference between foreign operating office’s statement	Unrealized gain or loss on financial assets measured at FVTOCI
	Share capital for ordinaryshares	Certificates of bond-to-stock conversion	Total		Legal reserve	Special reserve	Undistributed earnings
	$ 1,034,779 - -	- - -	1,034,779 - -	3,959,560 - -	1,091,939 - -	317,020 - -	6,062,560 2,732,361 (6,078)	(631,970) (18,562) - - 45,017 403
	-	-	-	-	-	-	2,726,283	45,017 403		2,771,703
	- - - - -	- - - - -	- - - - -	- - - (1,313) -	207,604 - - - -	- 333,513 - - -	(207,604) (333,513) (1,086,518) - (10,140)	- - - - - - - - - 10,140		- - (1,086,518) (1,313) -
	1,034,779 - -	- - -	1,034,779 - -	3,958,247 - -	1,299,543 - -	650,533 - -	7,151,068 3,472,201 3,081	(586,953) (8,019) - - (82,102) (5,259)		13,499,198 3,472,201 (84,280)
	-	-	-	-	-	-	3,475,282	(82,102) (5,259)		3,387,921
	- - - - - - 25,000 -	- - - - - - - 1,167	- - - - - - 25,000 1,167	- - - 183,236 5,460 24,931 1,050,971 60,853	271,615 - - - - - - -	- (55,561) - - - - - -	(271,615) 55,561 (1,376,256) - - - - -	- - - - - - - - - - - - - - - -		- - (1,376,256) 183,236 5,460 24,931 1,075,971 62,020
	$ 1,059,779	1,167	1,060,946	5,283,698	1,571,158	594,972	9,034,040	(669,055) (13,278)		16,862,481

(Please read the Notes to the Parent Company Only Financial Statements) Manager: HO, TE-YU

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

83

Lotes Co., Ltd.

Statement of Cash Flows

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

Cash flows from (used in) operating activities: Net profit before tax Items of adjustment: Adjustments to reconcile profit (loss) Depreciation expense Amortization expense Expected credit loss (gain) Interest expense Interest income Share of the profit from subsidiaries, associates and joint ventures accounted for using equity method Net loss on financial assets measured at FVTPL Inventory valuation and disposal loss Profit from the disposal and scaping of property, plant and equipment Compensation expense for employee stock options Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease (increase) in notes receivable Increase in accounts receivable Decrease (increase) in other receivables Increase in inventory Decrease (increase) in advance payment Total net change in the assets related to operating activities Net change in the liabilities related to operating activities: Increase in contract liabilities Increase (decrease) in notes payable Decrease in accounts payable Increase (decrease) in other payables Decrease in provision for liabilities Increase (decrease) in other current liabilities Increase in refund liabilities Decrease in other non-current liabilities Total net change in the liabilities related to operating activities Total net change in the assets and liabilities related to operating activities Total of the adjustment items Cash inflow generated from operating activities Interest received Interest paid Income taxes paid Cash flows from (used in) operating activities Cash flows in investing activities: Acquisition of financial assets measured at FVTOCI Disposal of financial assets measured at FVTPL Acquisition of investment accounted for using equity method Acquisition of property, plant and equipment Disposal of property, plant and equipment Increase in other receivables Decrease in other receivables Increase in intangible assets Acquisition of investment property (Increase) decrease in other non-current assets Net cash outflow from investment activities Cash flows in financing activities: Increase in short-term loans Issuance of corporate bonds Repayment of lease principal Issuance of cash dividends Cash capital increase Cash flows from (used in) financing activities Increase (decrease) in cash and cash equivalents Beginning balance of cash and cash equivalents Ending balance of cash and cash equivalents	2021 $ 3,940,451 7,020 25,901 (669) 6,747 (1,746) (1,905,258) (28,565) 21,612 (467) 24,931	2020 3,139,372 7,274 11,778 (2,627) 1,420 (10,165) (1,294,043) (2,080) 29,666 (136) -
	(1,850,494)	(1,258,913)
	574 (1,526,232) (527) (306,989) 1,830	(810) (403,834) 17,123 (149,055) (910)
	(1,831,344)	(537,486)
	20,149 10,690 (525,386) (5,760) (187) (425) 33,338 -	6,394 (16,222) (233,064) 49,829 (69) 691 4,511 (199)
	(467,581)	(188,129)
	(2,298,925)	(725,615)
	(4,149,419)	(1,984,528)
	(208,968) 1,987 (3,065) (420,739)	1,154,844 10,763 (1,420) (339,638)
	(630,785)	824,549
	(14,400) 27,945 (570,421) (5,852) 467 - 86,468 (10,852) (1,516) (3,322)	- - (14,385) (1,181) 252 (966) - (58,424) (17,923) 9,435
	(491,483)	(83,192)
	552,240 1,152,983 (59) (1,376,256) 1,075,971	- - (59) (1,086,518) -
	1,404,879	(1,086,577)
	282,611 497,302	(345,220) 842,522
	$ 779,913	497,302

(Please read the Notes to the Parent Company Only Financial Statements) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU Accounting Manager: LIU, HSIN-HSIA

84

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Lotes Co., Ltd. Notes to the Parent Company Only Financial Statements 2021 & 2020 (All amounts are in NT$ thousands unless otherwise stated)

I. Company History

Lotes Co., Ltd. (hereinafter referred to as the “Company”) was incorporated on August 23, 1986 in accordance with the provisions of the Company Law and was approved for registration with its registered office at No.15, Wuxun Street, Anle District, Keelung City. The Company (hereinafter referred to as the “Company”) are principally engaged in the sale and purchase of various hardware parts and components, the manufacturing and processing of various terminals and their connectors, the import and export business in connection with the preceding item and the agency of the preceding item in connection with the tender quotation and distribution of products of domestic and foreign manufacturers. Please refer to Note XIV for further details.

II. Date and Procedures of Approval of Financial Statement

The Parent Company Only Financial Statement was approved and released by the Board of Directors on March 21, 2022.

III. Application of New and Revised Standards and Interpretations

(1) Influence of the Adoption of New and Revised Standards and Integrations Approved by the Financial Supervisory Commission

Since January 1, 2021, the Company has adopted the amended International Financial Report Standards, and this did not cause material impact on the parent company only financial statements:

‧Amendments to IFRS 4 “Temporary Exemption from the Extension of IFRS 9” ‧Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, “Changes in Interest Rate Indicators - Phase 2”

The Company adopted the following newly amended IFRSs effective April 1, 2021, with no significant impact on parent company only financial statements.

‧Amendment to IFRS 16 – “Covid-19-Related Rent Concessions beyond 30 June 2021” (2) Effects of new and revised standards and interpretation has been approved by FSC but not yet being adopted

The Company assesses that the application of the following newly amended IFRSs, effective January 1, 2022, will not have a significant impact on parent company only financial statements.

‧Amendments to IAS 16 – “Property, Plant and Equipment: Proceeds before Intended Use” ‧Amendments to IAS 37 – “Onerous Contracts—Cost of Fulfilling a Contract” ‧Annual Improvements to IFRS Standards 2018–2020

‧Amendments to IFRS 3 – “Reference to the Conceptual Framework” (3) New and revised standards and interpretations not yet recognized by the FSC The Company does not expect the following newly issued and amended standards, which have not yet been endorsed, to have a material impact on the parent company only financial statements.

‧Amendments to IFRS 10 and IAS 28, “Disposal of or Contribution to Assets between an Investor and its Affiliate or Joint Venture”.

‧Amendments to IFRS 17, “Insurance Contracts” and IFRS 17

‧Amendments to IAS 1 – “Classification of Liabilities as Current or Non-Current”

‧Amendments to IAS 1 – “Disclosure of Accounting Policies”

‧Amendments to IAS 8 – “Definition of Accounting Estimates”

‧Amendments to IAS 12 – “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

IV. Summary of Major Accounting Policies

The major accounting policies adopted in this Financial Statement are summarized as follows. Unless otherwise noted, the following accounting policies have been applicable for all presentation period of the Individual Financial Statement.

(1) Compliance statement

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

The Individual Financial Statement was compiled in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers.

• (2) Compiling Basis

• Measurement foundation

Except the major items in the following balance sheet, the Individual Financial Statement was compiled based on the historical costs:

• (1) Financial assets at fair value through profit or loss measured with fair value.

• (2) Financial assets measured at fair value through other comprehensive income. (3) Liabilities for cash-settled share-based benefit agreements that are measured at fair value.

• (4) Net defined benefit liability (or asset) is measured according to the fair value of the retirement fund assets deducting present value of the defined benefit obligation and the ceiling influence value listed in Footnotes IV (16).

• Functional Currency and Presentation Currency

Each party of the Company takes the currency of major economic environment where its operation is located as its functional currency. The Individual Financial Statement is presented in the functional currency of the Company, TWD. All of the financial information expressed herein in TWD is of one thousand per unit.

• (3) Foreign currency

• Foreign currency trading

Foreign currency is converted into functional currency according to exchange rate on the date of transaction. At the end of each subsequent reporting period (the “Reporting Date”), foreign currency monetary items are translated into functional currency at the exchange rate prevailing on that date. Non-monetary items measured at fair value in foreign currencies are translated into functional currencies using the exchange rates prevailing at the date of fair value measurement, while non-monetary items measured at historical cost in foreign currencies are translated at the exchange rates prevailing at the dates of the transactions.

The foreign currency exchange difference resulting from the conversion is recognized to be other comprehensive Income excepting for the following situations, otherwise, recognized to be gains and losses:

(1) Equity instruments designated as measured at fair value through other comprehensive income.

(2) Financial liabilities designated as a net investment hedge for a foreign operating entity are within the effective range of the hedge; or

• (3) Eligible cash flow hedges are within the effective range of the hedge.

• Foreign Operating Organizations

The assets and liabilities of foreign operating organizations, including the business reputation and fair value adjustment during the acquisition, are converted to be NTD according to exchange rate on the report day; gains and losses are converted into NTD according to exchange rate in the current period, and the resultant conversion difference is recognized to be other comprehensive Income.

In case of the loss of control, joint control or material influences arising from the punishment on foreign operating organizations, the accumulated conversion differences related to the foreign operating organizations shall be fully reclassified as gains and losses. In case of affiliated company or joint ventures of foreign operating organizations involved in some of the punishment, related accumulated conversion differences shall be fully reclassified as gains and losses in proportion.

As to the receivable and payable monetary items of foreign operating organizations, if without the repayment plan or the possibility of repayment in foreseeable future, the resultant gains and losses from foreign currency conversion shall be regarded as a part of net investments to the foreign operating organizations as recognized as other comprehensive income.

• (4) Standards for classifying current and non-current assets and liabilities

• Assets meeting one of the following conditions are recognized to be current assets, and

• other assets not belonging to current assets are recognized to be non-current assets: 1. Those that are expected to be realized during the normal operating period or intended to be sold or consumed.

• Those held mainly for the purpose of transaction.

• Those expected to be realized within 12 months after the reporting period.

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

1. The asset is cash or cash equivalents, unless the asset is otherwise restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

The liabilities meeting any one of the following conditions are current liabilities, and other liabilities not belonging to current liabilities are recognized to be non-current liabilities:

1. Those expected to be paid off during the normal operating period.

2. Those held mainly for the purpose of transaction.

3. Those expected to be paid off within 12 months after the reporting period.

4. Liabilities that do not have an unconditional right to extend the maturity period to at least 12 months after the reporting period. The terms of the liability may, at the option of the counterparty, not affect its classification if the issuance of equity instruments results in its settlement.

5. (5) Cash and cash equivalents

Cash includes cash on hand and demand deposits. Cash equivalents are the investments which are allowed to be converted into normed cash with few value change risks and short-term high flowability. Certificate of deposit which satisfy the foregoing definition and with the holding purpose of meeting the short-term cash pledges rather than investment or others shall be recognized as cash equivalents.

• (6) Financial instrument

Accounts receivable and the original debt securities issued are recognized when they are incurred. All other financial assets and financial liabilities were originally recognized when the company became a party to the terms of the financial instrument agreement. Financial assets that are not measured at fair value through profit or loss (except accounts receivable, which do not contain a significant financial component) or financial liabilities are measured at fair value plus the transaction cost directly attributable to the acquisition or issue. Accounts receivable, which do not contain significant financial components, are originally measured at transaction prices.

1. Financial assets

The purchase or sale of financial assets by a conventional trader, the company shall treat all purchases and sales of financial assets classified in the same manner in accordance with the transaction date or the settlement date.

At the time of the original recognition, financial assets were classified as: financial assets measured at amortized cost, debt instrument investments measured at fair value through other comprehensive income, equity instrument investments measured at fair value through other comprehensive income, or financial assets measured at fair value through gains and losses.

The company will only change its business model for managing financial assets from the first day of the next reporting period to classify all affected financial assets.

• (1) Financial assets measured at amortized cost

Financial assets are measured at post-amortized cost when they simultaneously meet the following conditions and are not specified to be measured at fair value through profit or loss:

• ‧The financial asset is held under a business model for the purpose of collecting contractual cash flow.

‧The cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

The cumulative amortization of such assets is subsequently calculated by the effective interest method plus or minus the original amount recognized, and the amortized cost of any loss allowance is adjusted. Interest income, foreign exchange gains and losses and impairment losses are recognized as gains and losses. When derecognized, the profit or loss shall be included in the profit or loss.

(2)Financial assets measured at FVTOCI

When the debt instrument investment simultaneously meets the following conditions and is not specified to be measured at fair value through profit and loss, it is measured at fair value through other consolidated profit and loss:

• ‧The financial asset is held under a business model for the purpose of collecting contractual cash flow and selling.

• ‧The cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

outstanding principal amount.

The company may, at the time of its original recognition, irrevocably choose to report the subsequent changes in the fair value of its non-tradable equity instrument investments to other consolidated profits and losses. The foregoing selection is made on an item-by-item tool basis.

Debt instrument investors are measured by fair value afterwards. Interest income, foreign exchange gains and losses and impairment losses calculated by the effective interest method are recognized as gains and losses, while the remaining net gains or losses are recognized as other comprehensive income. When discounting, the accumulated amount of other comprehensive income shall be reclassified into comprehensive income.

Equity instrument investors are measured by fair value afterwards. Dividend income (unless it clearly represents the recovery of a portion of the investment cost) is recognized as a profit or loss. The remaining net benefits or losses are recognized as other comprehensive income and are not reclassified into gains and losses.

Dividend income from equity investments is recognized on the date (usually ex-dividend date) when the consolidated company becomes entitled to receive dividends.

(3)Financial assets measured at FVTPL

Financial assets that are not measured at fair value at the above amortized cost or through other comprehensive income are measured at fair value through gains and losses, including derivative financial assets. The company may, at the time of its original recognition, irrevocably designate financial assets that meet the criteria of measuring at fair value according to the amortized cost or through other comprehensive income as financial assets measured at fair value through gains and losses in order to eliminate or substantially reduce improper accounting matching.

Such assets are subsequently measured at fair value and their net gains or losses (including any dividends and interest income) are recognized as gains or losses.

(4) Business model evaluation

The purpose of the company is to assess the business model of holding financial assets at a portfolio level, which best reflects the way of operation and management and the way of providing information to management. The following information is considered:

• ·The portfolio policies and objectives described and the operation of such policies. Including whether the management’s strategy is to focus on earning contractual cash flow, maintaining a certain portfolio of interest rates, matching the duration of financial assets with the duration of the relevant liabilities or anticipated cash outflows, or achieving cash flow through the sale of financial assets.

• ·Performance of the business model and how the financial assets held under the business model are evaluated and reported to the principal managers of the business.

• ·Risks that affect the performance of the business model (and the financial assets held under the business model) and the manner in which such risks are managed.

• ·The frequency, amount and timeliness of previous sales of financial assets, the reasons for such sales and the expectation of future sales.

The transfer of a financial asset to a third party for the above business purposes that does not meet the exclusion criteria is not a sale as described above, consistent with the purpose for which the merged company continues to recognize the asset.

• Financial assets held for trading and managed and evaluated for performance on a

• fair value basis are measured at fair value through profit and loss.

• (5) Evaluate whether the cash flow of the contract is fully the interest on the payment of the principal and the amount of outstanding principal

For evaluation purposes, the principal is the fair value of the financial asset at the time of its original recognition, and the interest is made up of the following considerations: the time value of money, the credit risk associated with the amount of outstanding principal in circulation during a particular period, and other basic lending risks and costs and profit margins.

To evaluate whether the contract cash flow is fully interest on the principal and the outstanding principal amount, the company considers the terms of the financial instrument contract, including whether the financial asset contains a contract term that can change the point or amount of the cash flow of the contract, causing it to fail to meet

88

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

this condition. In the evaluation, the consolidated company considers:

·Any contingencies that change the timeliness or amount of the cash flow of the contract;

·The terms of the coupon rate may be adjusted, including the nature of the variable rate;

·The nature of prepayment and extension; and

·Claims of the consolidated company are limited to cash flow terms derived from specific assets (e.g. non-recourse nature).

(6) Impairment of financial assets

For the financial assets measured at the amortized cost after (including cash and about when cash, notes receivable, accounts receivable, other receivables, refundable deposit, and other financial assets, etc.), through the other comprehensive income measured at fair value, the debt instruments of investment assets and contract of expected loss, the company recognizes the allowance for credit losses.

The following financial assets are measured against losses according to the expected credit loss amount of 12 months, and the rest are measured according to the expected credit loss amount of the existing period:

‧Determine that the credit risk of the debt securities at the reporting date is low; and

‧The credit risk of other debt securities and bank deposits (i.e. the risk of default during the expected life of financial instruments) has not increased significantly since the original recognition.

The loss allowance for accounts receivable and contract assets is measured in terms of the expected credit loss during the period of existence.

In determining whether credit risk has increased significantly since the initial recognition, the consolidated company considers reasonable and verifiable information (available at no excessive cost or investment), including qualitative and quantitative information, as well as analysis based on the Company’s historical experiences, credit assessment and forward-looking information.

The consolidated company shall be deemed to be in default of the financial asset if the debtor of the contract payment is unlikely to meet his credit obligations to make the full payment to the consolidated company.

Expected credit loss during the life of a financial instrument refers to the expected credit loss arising from all possible defaults during the life of the financial instrument.

Twelve-month expected credit loss refers to the expected credit loss arising from the possible default of the financial instrument within twelve months after the date of the report (or a shorter period, if the expected duration of the financial instrument is shorter than twelve months).

The longest contract period during which the expected credit loss is measured is the longest contract period during which the company is exposed to credit risk.

The expected credit loss is the probabilistic weighted estimate of the credit loss during the expected life of the financial instrument. Credit losses are measured in terms of the present value of all cash shortfalls, the difference between the cash flows that the company can collect under the contract and the cash flows that the company expects to collect. The expected credit loss is discounted at the effective interest rate of the financial asset.

On each reporting date, the company evaluates whether there is a credit impairment in the debt securities on which financial assets are measured at after-amortized cost and on which fair value is measured through other comprehensive income. When one or more events have occurred that adversely affect the estimated future cash flow of a financial asset, the financial asset has suffered a credit impairment. Evidence of credit impairment of financial assets includes observable information relating to:

·Major financial difficulties of the borrower or issuer;

·Default, such as delay or delay beyond a specified period;

·For economic or contractual reasons related to the borrower’s financial difficulties, the merged company gives the borrower concessions that the borrower would not have considered;

·The borrower is likely to file for bankruptcy or other financial restructuring; or

·The active market for the financial asset disappears due to financial difficulties.

The loss allowance for a financial asset measured at its amortized cost is deducted from the carrying amount of the asset. The allowance for losses on debt instrument investments is measured at fair value through other comprehensive income. It is

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

adjusted and recognized as other comprehensive income (without reducing the carrying amount of the assets).

When the company cannot reasonably expect to recover the financial assets as a whole or in part, it will directly reduce the total book amount of its financial assets. For the company, the company shall analyze the date and amount of the write-off on the basis of whether it is reasonable to expect recovery. The company does not expect a significant reversal of the write-off. However, financial assets that have been written off may still be enforced to comply with the procedures of the consolidated company for recovering overdue amounts.

(7) Financial assets derecognition

When the Company terminates the contractual rights from the cash flow of such assets or has transferred the financial assets and almost all risks and returns of the asset ownership have been transferred to other enterprises, the financial assets shall be derecognized.

Transactions in which the Company enters into transfers of financial assets that retain all or substantially all of the risks and rewards of ownership of the transferred assets continue to be recognized on the balance sheet.

2. Financial liabilities and equity instruments

(1) Classification of liabilities or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity based on the substance of the contractual agreements and the definitions of financial liabilities and equity instruments.

(2) Equity transactions

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the amount of the consideration received less direct issue costs.

(3) Compound financial instruments

The number of shares issued does not vary with the change in fair value of the compound financial instruments, which are convertible bonds (denominated in New Taiwan dollars) that the holders have the option to convert to equity.

The original recognition amount of the liability component of a compound financial instrument is measured at the fair value of a similar liability excluding the equity conversion rights. The original recognition amount of the equity component is measured as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to the carrying amounts of the original liability and equity.

After initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured after initial recognition.

Interest related to financial liabilities is recognized as profit or loss. Financial liabilities are reclassified to equity upon conversion, and no gain or loss is recognized upon conversion.

(4) Financial liabilities

Financial liabilities are classified as amortized costs or measured at fair value through profit or loss. Financial liabilities which are held for trading, derivatives or specified at the time of their original recognition are classified as being measured at fair value through profit or loss. Financial liabilities, measured at fair value through profit and loss, are measured at fair value, and the associated net benefits and losses, including any interest expense, are recognized as profit and loss.

The effective subsequent interest method for other financial liabilities is measured at the amortized cost. Interest expenses and exchange gains and losses are recognized as gains and losses. Any benefit or loss at the time of discounting is also considered as profit or loss.

(5) Derecognition of financial liabilities

The Company derecognizes financial liabilities when contractual obligations have been fulfilled, cancelled or matured. When the terms of a financial liability are modified and the cash flows of the modified liability differ materially, the original financial

90

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

liability is derecognized and a new financial liability is recognized at fair value based on the modified terms.

When derecognizing financial liabilities, the difference between carrying amount and the sum of paid or payable considerations (including any transferred non-cash capital or assumed liabilities) shall be recognized as gains and losses.

(6) Offset between financial assets and liabilities

Financial assets and financial liabilities can be offset with each other and represented on the balance sheet with net value only when the Company has legal rights to offset and has the intention to deliver with net value as well as realize capital and liquidate the liabilities.

3. Derivative financial instruments

The Company holds derivative financial instruments to avoid foreign currency and interest rate risks. Embedded derivatives are separated from the main contract when specific conditions are met and the main contract is not a financial asset.

Derivative instruments are initially recognized at fair value and subsequently measured at fair value, and the resulting gain or loss is recognized directly in profit or loss.

(7) Inventory

Inventory shall be measured with the lower of the costs and net realizable value. The costs include the acquisition, production and processing costs enabling them to arrive at the available places and status and other costs, which are calculated according to the standard cost method, and priced at cost transferring according to weighted mean method. The costs of the inventory of finished products and products in process include the manufacturing costs amortized based on normal production capacity according to proper percentage.

Net realizable value refers to the estimated prices under normal operation deducting estimated costs to be needed for estimated completion and estimated costs to be needed for completing selling.

(8) Investing subsidiary

In preparing individual financial statements, the Company applies the equity method to investees over which it has control. Under the equity method, the share of current profit or loss and other comprehensive income of the individual financial report is the same as the share of current profit or loss and other comprehensive income attributable to the owners of the parent in the financial statements prepared on a consolidated basis, and the interest of the owners of the individual financial report is the same as the interest attributable to the owners of the parent in the financial statements prepared on a consolidated basis.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are treated as equity transactions with owners.

• (9)Property, plant and equipment

• Recognition and measurement

Items of property, plant and equipment are measured at cost, including capitalized borrowing costs, less accumulated depreciation and any accumulated impairment. Significant components of property, plant and equipment are treated as separate items (major components) when they have different life cycles.

Gain or loss on disposal of property, plant and equipment is recognized in profit or

loss.

2. Subsequent costs

Subsequent expenses are capitalized only when it is probable that future economic benefits will flow into the Company.

1. Depreciation Depreciation is calculated based on the cost of the asset less its residual value and is recognized in profit or loss using the straight-line method over the estimated useful life of each component.

The land is not subject to depreciation.

The estimated useful lives for the current and comparative periods are as follows:

(1) Buildings 20-40 years

(2) Machinery 2-10 years

• (3) Other equipment 2-10 years

The Company reviews the method of depreciation, durability and residual value at each reporting date and makes appropriate adjustment as necessary.

1. Reclassification to investment real estate

When real property for own use is reclassified to investment property, the real

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

property is reclassified to investment property based on its carrying amount at the time of change of use.

(10) Investment property

Investment real estate means real property held for the purpose of earning rent or asset appreciation, or both, rather than for the purpose of production, provision of goods or services, or for administrative purposes. Investment real estate is originally measured by cost, and later measured by cost minus accumulated depreciation and accumulated impairment. The depreciation method, durable life and residual value shall be treated in accordance with the provisions of real estate, plant and equipment.

The disposal interest or loss of the investment real estate (calculated at the difference between the net disposal price and the account amount of the project) shall be recognized as the profit or loss.

The rental income of investment real estate is recognized as other income in the straight-line method during the lease term. The incentive to lease is recognized as part of the rental income during the lease term.

(11) Leasing

The company shall assess whether the contract is a lease or includes a lease on the date of formation of the contract. If the contract transfers control over the use of the identified assets for a period of time in exchange for consideration, the contract shall be a lease or includes a lease.

1. The lessee

The company recognize the right-of-use assets and lease liabilities on the beginning date of the lease. Right-of-use assets are originally measured in terms of cost, which includes the original measured amount of lease liabilities, adjusts the lease beginning date or before payment of any rent payment, and the initial direct costs, and applied to removing the asset and restoring its location or the estimated cost of the underlying assets. It minuses the charge of any lease incentives at the same time.

Depreciation of right-of-use assets following the commencement of the lease shall be carried out by the straight-line method at the end of the useful life of right-of-use assets or earlier at the end of the lease term. In addition, the company will periodically evaluate whether there is any loss of right-of-use assets and deal with any loss that has occurred, and adjust the right-of-use assets in the case of lease liabilities.

Lease liabilities are defined as the present value of lease benefits not yet paid at lease commencement date. If the implied lease rate is easy to determine, the discount rate will be that rate, and if not, the incremental borrowing rate of the Company will be used. Generally speaking, the consolidated company adopts its incremental borrowing rate as the discount rate.

Lease benefits measured in Lease liabilities include:

(1) fixed payments, including substantive fixed payments;

(2) depending on the variation of a certain index or rate of rent payment, the index or rate on the commencement date of the lease shall be used as the original measurement;

(3) the guaranteed amount of salvage value expected to be paid; and

(4) the price at which the option to exercise the option to purchase or terminate the lease will be reasonably determined or the penalty to be paid. Lease liabilities is then calculated using effective interest method, and the amount was measured when:

(1) changes in the index or rate used to determine lease payments result in

changes in future lease payments;

(2) the guaranteed amount of the residual value expected to be paid has changed;

(3) the evaluation of the underlying asset purchase option has changed;

(4) the estimate of whether to exercise the option of extension or termination has changed, which leads to the change of the assessment of the lease period;

(5) modification of the subject matter, scope or other terms of the lease. Lease liabilities are remeasured due to the aforementioned changes in the index or rate used to determine lease payments, changes in the residual value guarantee amount, and changes in the evaluation of purchases, extensions or termination options, the book value of right-of-use assets should be adjusted accordingly. When the book value of

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

right-of-use assets is reduced to zero, the remaining re-measured amount is recognized in profit or loss.

For the tease modifications about the reduced coverage, the book amount of right-of-use assets will be reduced to reflect partial or total termination of Lease, and the difference between Lease assets and Lease assets will be included in the profit and loss.

The company will express the right-of-use assets and lease liabilities that do not conform to the definition of investment real estate in the form of single line items in the balance sheet.

2. The lesso

The transaction in which the company is a lessor shall be classified as a financial lease or an operating lease on the date of establishment of the lease, depending on whether or not the lease contract is transferred to almost all the risks and rewards attached to the ownership of the underlying asset. In the evaluation, the consolidated company shall consider certain indicators, including whether the lease term covers the principal part of the underlying asset’s economic life.

If the company is a sublease lessor, it will handle the master lease and the sublease transaction respectively and evaluate the sublease transaction classification based on the right-of-use assets generated from the master lease. If the principal lease is a short-term lease and a recognition waiver is applicable, the sublease transaction shall be classified as an operating lease.

• (12) Intangible assets

1. Recognition and measurement

• Computer software acquired by the Company is measured at cost less accumulated

• amortization and accumulated impairment.

2. Subsequent expenditure

The subsequent expenditure can be capitalized only when they can increase the future economic benefits of relevant specific assets, and all of other expenditures are recognized as gains and losses when they occur, including the expenses for developing reputation and brand establishing.

3. Amortization

Amortization is calculated based on the cost of the asset less its estimated residual value and is recognized in profit or loss using the straight-line method over the estimated useful lives of the Intangible assets, from one to five years from the time the assets reach a ready-for-use condition.

The Company reviews the amortization method, useful life and residual value of Intangible assets at each reporting date and makes appropriate adjustments as necessary. (13) Non-financial asset impairment

At each reporting date, the Company assesses whether there is any indication that the carrying amount of non-financial assets (other than inventories, deferred income tax assets) may be impaired. If any indication exists, the recoverable amount of the asset is estimated.

For the purpose of impairment testing, cash inflows that are largely independent of other individual assets or groups of assets are treated as the smallest identifiable group of assets.

The recoverable amount is the higher of the fair value less costs to dispose of the individual asset or cash-generating unit or its value in use. If the recoverable amount of an individual asset or cash-generating unit is less than its carrying amount, an impairment loss is recognized. An impairment loss is recognized immediately in profit or loss and is reduced first by the carrying amount of goodwill amortized on the cash-generating unit and then by the carrying amount of each other asset in the unit in proportion to its carrying amount.

Non-financial assets other than goodwill are reversed only to the extent that they do not exceed the carrying amount (net of depreciation or amortization) that would have been determined had no impairment loss been recognized for the asset in prior years.

(14) Provision for liabilities

Provisions are recognized as present obligations due to past events that make it probable that the Company will need to expend economically efficient resources in the future to settle the obligation and the amount of the obligation can be reliably estimated.

The amount recognized in Provisions takes into account the risks and uncertainties of the obligation and is the best estimate of the payments required to settle the obligation at the end of the reporting period. If Provisions is measured at the estimated cash flows to settle this realistic obligation, the carrying amount is the present value of those cash flows.

93

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(15) Income recognition

Revenue from customer contracts

Income is measured in consideration for the expected entitlement to transfer goods or services. The company recognizes revenue from the transfer of control of goods or services to the customer in order to meet its performance obligations.

The company manufactures electronic components and sells them to manufacturers in the electronics industry. The company recognizes revenue at the time of the transfer of control over the products. Control transfer of the product means that the product has been delivered to the customer and the customer can fully determine the sales channel and price of the product, and there is no failure to fulfill obligations that would affect the customer’s acceptance of the product. Delivery occurs when the product is shipped to a specific location, the risk of obsolescence and loss has been transferred to the customer, the customer has accepted the product in accordance with the sales contract, the acceptance terms have expired, or the consolidated company has objective evidence that all acceptance conditions have been met.

The consolidated company recognizes revenue on the basis of the net amount of the estimated discount deducted from the contract price, the amount of which is estimated based on past experiences, and only to the extent that there is a high probability that no significant turnaround will occur. As of the date of the report, the sales will expect to pay the customer for the discount, which is refunded as refund liabilities. The average credit period of sales is one hundred twenty days to one hundred fifty days, which is consistent with the practice of the same trade, so no financing elements are included.

The company shall recognize accounts receivable at the time of delivery of the goods, as the consolidated company shall have the right to receive unconditional consideration at that time.

The time between the transfer of goods or services from all customer contracts to the customer and the time between the customer’s payment for the goods or services is expected to be no more than one year, so the company does not adjust the time currency value of the transaction price.

(16) Employee benefits

1. Defined contribution plan

The contribution obligation of the defined contribution pension plan is recognized as an expense in the period in which the employees render service to the Company.

2. Defined benefit plan

The Company’s net obligation to a defined benefit plan is measured by discounting the present value of future benefits earned by the employee’s current or prior period of service, less the fair value of the plan assets.

The defined benefit obligation is actuated annually by a qualified actuary using the projected unit benefit method. When the results of the calculation are probable to be favorable to the Company, an asset is recognized to the extent of the present value of any economic benefits that may be obtained by returning a contribution from the plan or reducing future contributions to the plan. Any minimum funding requirement is taken into account in calculating the present value of economic benefits.

The remeasurement of the net defined benefit obligation, including actuarial gains and losses, compensation for plan assets (excluding interest), and any change in the impact of asset limits (excluding interest) is recognized immediately in other comprehensive income and accumulated in retained earnings. The Company determines net interest expense (income) for net defined benefit liabilities (assets) using the net defined benefit liabilities (assets) and discount rate determined at the beginning of the annual reporting period. Net interest expense and other costs for defined benefit plans are recognized in profit or loss.

When a plan is revised or curtailed, changes in benefits related to prior period service costs or curtailment gains or losses are recognized immediately in profit or loss. The Company recognizes gain or loss on the settlement of defined benefit plans when settlement occurs.

3. Short-term employee benefits

Short-term employee benefit obligations are recognized as an expense when services are provided. If the Company has a present legal or constructive obligation to pay for services rendered by employees in the past and the obligation can be estimated reliably, the amount is recognized as a liability.

94

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(17) Share-based payment transactions

Equity-settled share-based payment agreements recognize an expense and increase relative equity over the vesting period of the award at the grant date fair value. The expense recognized is adjusted for the number of awards that are expected to qualify for the service condition and the non-market vesting condition, and the final amount recognized is measured based on the number of awards that qualify for the service condition and the non-market vesting condition on the vesting date.

The non-vested conditions regarding share-based payment awards are reflected in the measurement of the fair value of the share-based payment awards at the date of grant and no adjustment is required to be made to verify the difference between the expected and actual results.

The fair value amount of the share appreciation rights payable to employees for cash settlement is recognized as an expense and an increase in the relative liability in the period in which the employees reach the point where they can receive unconditional compensation. The liability is remeasured at the fair value of the share appreciation rights at each reporting date and settlement date, and any change is recognized in profit or loss. (18) Income tax

Income taxes include current and deferred income tax asset. Except those related to enterprise consolidation and items directly recognized as equities or other comprehensive income, Current tax and deferred income tax asset shall be recognized as gains and losses.

Current taxes include expected payable income taxes or receivable tax rebates of the annual taxation (losses) calculated according to the legal tax rate or substantial legal tax rate on the report day, and any unappropriated retained earnings plus 10% income tax recognized as tax expense in the shareholders meeting resolution year calculated according to the adjustments to the payable income taxes in the previous year and the provisions of income tax laws.

Deferred income tax assets are measured and recognized according to the temporary difference between the carrying amount and taxation basis of assets and liabilities with financial report objectives. In case of any of the following situations, the temporary differences will not be recognized as deferred income tax assets:

1. Those do not belong to the assets or liabilities originally recognized in the transaction of enterprise consolidation, and not influencing accounting profits and taxation incomes (losses) during the transaction.

2. Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future.

3. Original recognition of business reputation

Deferred income tax assets are recognized for unused tax losses and unused income tax credits in subsequent periods to the extent that it is probable that future taxable income will be available against which the temporary differences can be deducted. Deferred income tax assets are reassessed at each reporting date and reduced to the extent that it is not probable that the related income tax benefit will be realized, or to the extent that it becomes probable that sufficient taxable income will be available to allow the reversal of the original reduction. Deferred income tax assets are measured according to the tax rate in the current period when the expected capital is realized or liabilities are liquidated and based on the legal tax rate or substantial legal tax rate on the report day.

• Only when the Company shall meet the following conditions at the same time, can the

• deferred income tax assets and deferred tax liabilities offset with each other: 1. Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and

• Deferred income tax assets and deferred tax liabilities are related to one of the subjects of tax payment from which the same tax authority levies income tax;

  • (1) Same subject of tax payment; or

  • (2) Different subjects of tax payment, but all subjects intend to liquidate the current tax liabilities and assets based on net amount or at the same time realize assets and liquidate liabilities in each of the future periods when deferred income tax assets of major amounts are expected to be recovered and deferred tax liabilities expected to be liquidated.

• (19) Earnings per share

The Company lists the basic and diluted earnings per share of holders of common stock equity of the Company. The basic earnings per share of the Company shall be calculated

95

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

with the gains and losses of the holders of common stock equity of the Company divided by the weighted mean of current outstanding common shares. Diluted earnings per share shall be calculated after adjusting the influence of all potential diluted common shares of the gains and losses of the holders of common stock equity of the Company and the weighted mean of current outstanding common shares. The potential diluted common shares of the Company include convertible corporate bonds and stock options for employees.

(20) Segmental information

The Company has disclosed segment information in the Consolidated Financial Statements and therefore individual financial statements do not disclose segment information.

V. Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties

Management is required to make judgments, estimates and assumptions in preparing this entity’s financial statements in accordance with “Guidelines Governing the Preparation of Financial Reports by Securities Issuers” that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from estimates.

The management authority continuously inspects the estimate and basic assumption, and accounting changes are recognized during the period of changes and the period of future to be influenced.

The following assumptions and estimates are subject to significant risks of material adjustments to the carrying amounts of assets and liabilities in the next financial year, and the related information is as follows:

Inventory evaluation

Since inventory must be measured at the lower of cost or net realizable value, the company estimates the reported amount of inventory due to normal wear and tear, obsolescence, or no market sale value daily and reduces the cost of inventory to net realizable value. The net realizable value of inventories may change significantly due to rapid changes in the industry and the introduction of new products. Please refer to Note VI (4) for the inventory assessment.

VI. Descriptions for Important Accounting Items

• (1) Cash and cash equivalents

riptions for Important Accounting Items Cash and cash equivalents
Petty cash Checks and demand deposits Time deposits Cash and cash equivalents listed on the Statement	Dec. 31, 2021 $ 52 725,472 54,389 $ 779,913		Dec. 31, 2020 99 497,153 50 497,302

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Company are seen in Note VI (24). (2) Financial assets

1. Financial assets measured at FVTPL

Financial assets mandatorily measured at FVTPL: Current Non-hedging derivatives Forward exchange contracts Non-current Non-hedging derivatives Embedded derivatives—right of redemption Total	Dec. 31, 2021 $ -	Dec. 31, 2020 2,080
	3,370	-
	$ 3,370	2,080

Please refer to Note VI (11) for the disclosure of embedded derivatives of the convertible bonds issued by the Company.

Please refer to Note VI (24) for the amount recognized in profit or loss based on fair value remeasurement.

The Company engages in derivative financial instruments to hedge its exposure to

96

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

exchange rate risk arising from operating activities. The breakdown of derivative instruments reported as financial assets measured at FVTPL for non-applicable hedge accounting is as follows:

accounting is as follows:
		Dec. 31, 2020
Financial assets	Contract (NT$	principal 1,000)	Maturity
Forward exchange contracts “ “ “ “	USD USD USD USD USD	4,000 2,000 2,000 2,000 2,000	110.01.11 110.01.12 110.01.22 110.02.09 110.02.18
“	USD	2,000	110.02.19
“ “	USD USD	2,000 6,000	110.02.23 110.03.10
“	USD	2,000	110.03.23
. Financial assets measured at FVTOCI
		Dec. 31, 2021	Dec. 31, 2020
Non-current:
Domestic unlisted (or OTC) stocks—SteadyBeat
Technology Corporation		8,545	-
Domestic unlisted (or OTC) stocks—G-sau
Co.,Ltd		955	-
Total	$	9,500	-

2. Financial assets measured at FVTOCI

The Company’s investments in these equity instruments are not held for trading purposes and have been designated as measured at FVTOCI.

The Company has no dividend income from equity instruments measured at FVTOCI as listed above for the year 2021.

As of December 31, 2021, none of the Company’s financial assets had been pledged as collateral.

(3) Notes receivable, accounts receivable and other receivables

Notes receivable Accounts receivable Other receivables Less: provisions	Dec. 31, 2021 $ 1,911 5,847,230 25,195 (4,755) $ 5,869,581	Dec. 31, 2020 2,485 4,320,998 111,377 (5,424) 4,429,436

For the changes in the provisions for notes and accounts receivable for the years 2021 and 2020, please refer to Note VI (24) 1. (3) Statement of Impairment Losses. (4) Inventory

Merchandises Finished goods Raw materials	Dec. 31, 2021 $ 993,764 2,061 29 $ 995,854	Dec. 31, 2020 710,364 108 5 710,477

The Company’s inventory as of December 31, 2021 and 2020 including allowance for inventory losses are NT$64,856 thousand dollars and NT$45,507 thousand dollars respectively.

The Company recognized inventory-related expenses (gain) as follows:

Cost of goods sold Inventory valuation and disposal loss Total	2021 $ 11,389,816 21,612 $ 11,411,428	2020 8,787,969 29,666 8,817,635

As of December 31, 2021 and 2020, the Company’s inventories were not pledged as security.

(5) Investment accounted for using the equity method

The investments of the Company accounted for using the equity method are as follows:

97

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Dec. 31, 2021 Dec. 31, 2020 Subsidiaries $ 12,624,489 10,225,811

1. Subsidiaries

Please refer to the consolidated financial statements for year 2021.

2. Guarantee

As of December 31, 2021 and 2020, the Company’s investments accounted for using the equity method did not provide security for the pledge.

(6) Property, plant and equipment

The changes in the cost, depreciation and impairment losses of the property, plant and equipment of the Company are as follows:

Cost or deemed cost: Balance on January 1, 2021 Addition Disposal Balance on December 31, 2021 Balance on January 1, 2020 Addition Disposal Balance on December 31, 2020 Losses on depreciation and impairment: Balance on January 1, 2021 Depreciation in the year Disposal Balance on December 31, 2021 Balance on January 1, 2020 Depreciation in the year Disposal Balance on December 31, 2020 Book value: December 31, 2021 December 31, 2020	Land $ 28,250 - -	Buildings		Machinery equipment 12,480 155 (715)		Other 49,298 5,697 (3,540)		Total 122,466 5,852 (4,255)
		32,438 - -
	$ 28,250	32,438		11,920		51,455		124,063
	$ 28,250 - -	32,438 - -		14,300 - (1,820)		48,319 1,181 (202)		123,307 1,181 (2,022)
	$ 28,250	32,438		12,480		49,298		122,466
	$ - - -	16,973 903 -		12,288 60 (715)		34,929 4,811 (3,540)		64,190 5,774 (4,255)
	$ -	17,876		11,633		36,200		65,709
	$ - - -	16,070 903 -		13,615 377 (1,704)		30,194 4,937 (202)		59,879 6,217 (1,906)
	$ -	16,973		12,288		34,929		64,190
	$ 28,250	14,562		287		15,255		58,354
	$ 28,250	15,465		192		14,369		58,276

As of December 31, 2021, and December 31, 2020, property, plant and equipment were used as collateral for short-term loans and financing lines. Please refer to Note VIII for details.

(7) Right-of-use assets

The changes in the costs of the lease of lands, buildings, machinery and other equipment, losses on depreciation and impairment of the consolidated company are as follows:

Cost of right-of-use assets: Balance on January 1, 2021 Addition Balance on December 31, 2021 Balance on January 1, 2020 Decrease Balance on December 31, 2020 Losses on depreciation and impairment of right-of-use assets: Balance on January 1, 2021 Depreciation for the period Balance on December 31, 2021 Balance on January 1, 2020 Depreciation for the period Decrease Balance on December 31, 2020 Book value: December 31, 2021	Buildings $ - 118
	$ 118
	$ 118 (118)
	$ -
	$ - 59
	$ 59
	$ 59 59 (118)
	$ -
	$ 59

98

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

December 31, 2020 $ -

(8) Investment property

The changes in the investment property of the Company are as follows:

Land Buildings Total Cost or deemed cost: Balance on January 1, 2021 $ 260,576 44,832 305,408 Addition - 1,516 1,516 Balance on December 31, 2021 $ 260,576 46,348 306,924 Balance on January 1, 2020 $ 248,200 39,285 287,485 Addition 12,376 5,547 17,923 Balance on December 31, 2020 $ 260,576 44,832 305,408 Losses on depreciation and impairment: Balance on January 1, 2021 $ - 5,481 5,481 Depreciation - 1,187 1,187 Balance on December 31, 2021 $ - 6,668 6,668 Balance on January 1, 2020 $ - 4,483 4,483 Depreciation - 998 998 Balance on December 31, 2020 $ - 5,481 5,481 Book value: December 31, 2021 $ 260,576 39,680 300,256 January 1, 2020 $ 248,200 34,802 283,002 December 31, 2020 $ 260,576 39,351 299,927 Fair value: December 31, 2021 $ 390,082 December 31, 2020 $ 372,159 As of December 31, 2021 and 2020, none of the Company’s investment properties had been pledged as security. Intangible assets The changes in the cost and amortization of the intangible assets of the Company are as follows: Computer software Other Total Cost: Balance on January 1, 2021 $ 143,219 600 143,819 Separate acquisition 10,852 - 10,852 Derecognization (42,987) - (42,987) Balance on December 31, 2021 $ 111,084 600 111,684 Balance on January 1, 2020 $ 84,795 600 85,395 Separate acquisition 58,424 - 58,424 Balance on December 31, 2020 $ 143,219 600 143,819 Losses on amortization and impairment: Balance on January 1, 2021 $ 46,236 - 46,236 Amortization for the period 25,901 - 25,901 Derecognization (42,987) - (42,987) Balance on December 31, 2021 $ 29,150 - 29,150 Balance on January 1, 2020 $ 34,458 - 34,458 Amortization for the period 11,778 - 11,778 Balance on December 31, 2020 $ 46,236 - 46,236 Book value: Balance on December 31, 2021 $ 81,934 600 82,534 Balance on December 31, 2020 $ 96,983 600 97,583	Land	Buildings 44,832 1,516	Total 305,408 1,516
	$ 260,576 -
	$ 260,576	46,348	306,924
	$ 248,200 12,376	39,285 5,547	287,485 17,923
	$ 260,576	44,832	305,408
	$ - -	5,481 1,187	5,481 1,187
	$ -	6,668	6,668
	$ - -	4,483 998	4,483 998
	$ -	5,481	5,481
	$ 260,576	39,680	300,256
	$ 248,200	34,802	283,002
	$ 260,576	39,351	299,927
			$ 390,082
			$ 372,159

(9) Intangible assets

The amortization expense of the intangible assets of the Company respectively recognized in the Statement of Comprehensive Income:

Operating cost Operating expense

2021	2020 3 11,775
$ 12 $ 25,889

99

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(10) Short-term loans

The details of the Company’s short-term loans are as follows:

Unsecured bank loan Unused line of credit Interest rate range		Dec. 31, 2021 552,240	Dec. 31, 2020 - 1,456,320 - %
	$
	$	1,207,600
		0.70%~0.85%

For information on the Company’s interest rate and foreign currency risk, please refer to Note VI (24). In addition, please refer to Note VIII for the Company’s pledge of assets for short-term loans and Note IX for the Company’s guarantee notes for bank loans and financing lines.

(11) Bonds payable

Interest rate range 0.70%~0.85% - % For information on the Company’s interest rate and foreign currency risk, please refer to Note VI (24). In addition, please refer to Note VIII for the Company’s pledge of assets for short-term loans and Note IX for the Company’s guarantee notes for bank loans and financing lines. onds payable	Interest rate range 0.70%~0.85% - % For information on the Company’s interest rate and foreign currency risk, please refer to Note VI (24). In addition, please refer to Note VIII for the Company’s pledge of assets for short-term loans and Note IX for the Company’s guarantee notes for bank loans and financing lines. onds payable	Interest rate range 0.70%~0.85% - % For information on the Company’s interest rate and foreign currency risk, please refer to Note VI (24). In addition, please refer to Note VIII for the Company’s pledge of assets for short-term loans and Note IX for the Company’s guarantee notes for bank loans and financing lines. onds payable
Information on the Company’s issuance of unsecured convertible bonds is as follows:
	Dec. 31, 2021
Total amount of convertible bonds issued	$	1,000,000
Cumulative amount converted		(63,900)
Unamortized balance of discount on bonds payable Balance of bonds payable at the end of the period Embedded derivatives—right of redemption (reported as financial assets measured at FVTPL) Equity component - conversion rights (reported as capital reserves - stock options)	$ $ $	(24,173) 911,927 3,370 171,527
		2021
Embedded derivatives—Redemption benefits (reported as other gains and losses) Interest expense	$ $	2,700 3,530

On August 19, 2021, the Company issued 10,000 domestic first three-year unsecured convertible bonds with a coupon rate of 0%, which are repayable in cash at par on maturity.

The conversion price was set at $563.2 per share at the time of issuance, and the conversion price will be adjusted according to the formula specified in the terms of the issuance if the conversion price of the Company’s common shares is adjusted in accordance with the terms of the issuance. The conversion price on December 31, 2021 was $547.5. There is no reset clause for the bonds.

The Company redeems the outstanding bonds at par value in cash if one of the following conditions is met:

1. If the closing price of the Company’s common stock on the Taiwan Stock Exchange exceeds the conversion price of the Bonds by more than 30% for 30 consecutive business days from the day after the third month of the issuance of the Bonds to the 40th day before the expiration of the issuance period.

2. The outstanding balance of the bonds is less than 10% of the original issue amount from the day after the third month of issuance to the 40th day before the expiration of the issuance period.

In fiscal 2021, the bondholders requested to convert 639 domestic three-year unsecured convertible bonds with a total carrying amount of $62,250 thousand, and the net change in capital reserves due to the conversion of bonds was $60,853 thousand, and the share capital generated from the conversion of bonds was $1,167 thousand. Please refer to Note VI (18) for the conversion of share capital.

(12) Lease liabilities

The carrying amounts of the Company’s lease liabilities are as follows:

Dec. 31, 2021 Current $ 59 Please refer to Note VI (24) for the maturity analysis. The amounts recognized in the profit and loss are as follows: 2021 Interest expense for lease liabilities $ 1 Short-term lease expense $ 896	Dec. 31, 2021	Dec. 31, 2020 -
		2020 1
	$ 1 $ 896
		-

Interest expense for lease liabilities Short-term lease expense

100

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

The amounts recognized in the Statement of Cash Flows are as follows:

2021 2020 Total cash outflow for leases $ 956 153 efund liabilities - current Dec. 31, 2021 Dec. 31, 2020 Refund liabilities - current $ 195,105 161,767 The refund liabilities are mainly the prepayments to customers for the sales discount and defects of electronic components. rovision for liabilities Dec. 31, 2021 Dec. 31, 2020 Provision for liabilities - non-current Employee benefits $ 45,220 49,258	2021 $ 956 Dec. 31, 2021 $ 195,105	2020 153

• (13) Refund liabilities - current

The refund liabilities are mainly the prepayments to customers for the sales discount and defects of electronic components.

(14) Provision for liabilities

Employee benefits are estimated under the Company’s defined benefit plan, please refer to Note VI (16) for details.

(15) Operating leasing

The company leases its investment real estate, which is classified as an operating lease because almost all risks and rewards belonging to the ownership of the underlying asset have not been transferred. Please refer to Note VI (8) for details of the investment real estate.

Due date analysis of lease benefits to report the total amount of undiscounted lease benefits received in the future is shown in the following table:

Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Total undiscounted lease payments	Dec. 31, 2021 $ 1,183 264 126 126 89	Dec. 31, 2020 4,544 523 - - - 5,067
	$ 1,788

Rental income generated from investment properties was NT$4,609,000 dollars and NT$4,896,000 dollars for 2021 and 2020 respectively. The direct operating expenses (including maintenance) incurred by the investment properties that generated rental income during the period were NT$1,367,000 dollars and NT$1,028,000 dollars respectively. (16) Employee benefits

1. Defined benefit plans

The reconciliation between the present value of defined benefit obligations and the fair value of plan assets of the Company is as follows:

		Dec. 31, 2021	Dec.	31, 2020
Present value of defined benefit obligations	$	78,057		83,499
Fair value of plan assets Net defined benefit liability	$	(32,837) 45,220		(34,241) 49,258
Details of the employee benefit liabilities of the Company are as follows:
		Dec. 31, 2021	Dec.	31, 2020
Liabilities from paid leaves	$	5,108		3,394

The defined benefit plan of the Company is contributed to special account of contribution for retirement of Bank of Taiwan. The retirement payment of each employee applicable to Labor Standards Law is calculated in accordance with the base obtained based on the length of service and the average salaries within six months before

101

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

retirement.

(1) Composition of plan assets

The retirement fund contributed by the Consolidated under the Labor Standards Law shall be controlled by the Labor Funds Operation Bureau of the Ministry of Labor (hereinafter referred to as the Labor Funds Bureau), and under the provisions of Measures on the Management and Application of Labor Retirement Funds, the annual minimum return settled and distributed from the funds operation shall not be lower than the incomes calculated in accordance with the 2-year time certificate of deposit rate of the local banks.

As of the reporting date, the balance of the Company in the special account of contribution for retirement of Bank of Taiwan amounts to NT$ 32,837,000 dollars. The data of the application of the labor retirement funds include funds yield and funds asset allocation, with details to be seen in the information released on the website of the Labor Funds Bureau.

(2) Changes in the present values of defined benefit obligations

Changes in the present values of defined obligations of the Company in 2021 and in 2020 are as follows:

Defined benefit obligation on January 1 Service cost and interest in the year Remeasurement of net defined benefit liabilities (assets) Benefit paid by the plan Defined benefit obligation on December 31	2021 $ 83,499 951 (3,373) (3,020)	2020 73,681 1,168 8,650 -
	$ 78,057	83,499

(3) Changes in fair value of plan assets

The changes in the fair value of defined benefit plan assets of the Company in 2021 and in 2020 are as follows:

Fair value of plan assets on January 1 Interest income Remeasurement of net defined benefit liabilities (assets) Amount contributed to the plan Benefit paid by the plan Fair value of plan assets on December 31	2021 $ 34,241 119 477 1,020 (3,020)	2020 31,952 238 1,052 999 -
	$ 32,837	34,241

(4) Expenses recognized in profit or loss

The expenses of the Company recognized in profit or loss in 2021 and in 2020 are as follows:

as follows:
Service cost for the period Net interest of net defined benefit liabilities Operating cost Promotion expense Administration expense R&D expense	2021 $ 662 170	2020 621 309
	$ 832	930
	$ 110 286 277 159	115 290 337 188
	$ 832	930

(5) Remeasurement of the net defined benefit liabilities (assets) recognized in other comprehensive income

Remeasurement of the accumulated net defined benefit liabilities (assets) of the Company recognized in other comprehensive income in 2021 and in 2020 are as follows:

Accumulated balance on January 1 Amount recognized in the year Accumulated balance on December 31	2021 $ (5,703) 3,851	2020 1,895 (7,598)
	$ (1,852)	(5,703)

102

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(6) Actuarial assumptions

The material actuarial assumptions used by the Company to determine the present value if defined benefit obligations at the end of the reporting period are as follows: Dec. 31, 2021 Dec. 31, 2020 Discount rate 0.70% 0.35% Increase in future salary 2.00% 2.00%

The amount of appropriation for defined benefit plans within 1 year after the reporting date for the year ended on December 31, 2021 is NT$1,002,000. The weighted average duration of defined benefit plans is 10 years.

(7) Sensitivity analysis

The effects of changes in the main actuarial assumptions adopted on December 31, 2021 and 2020 on the present value of defined benefit obligations are as follows:

December 31, 2021 Discount rate Increase in future salary December 31, 2020 Discount rate Increase in future salary	Effects on defined benefit obligations Increased by 0.25% Decreased by 0.25% $ (2,023) 2,099 2,066 (2,002) (2,278) 2,367 2,322 (2,247)
	Increased by 0.25% $ (2,023) 2,066 (2,278) 2,322

The above sensitivity analysis refers to the analysis on the influence of single assumption change based on the situation that other assumptions keep unchanged. In practice, many changes to the assumptions may be linked. The calculation method of sensitivity analysis shall be consistent with that of net defined benefit liabilities of the balance sheet.

The method and assumption applied in current sensitivity analysis is consistent with those adopted in early stage.

2. Defined contribution plan

As to the defined contribution plan, the Company shall contribute the retirement funds of employees to the individual accounts for labor retirement funds of the Bureau of Labor Insurance according to 6% of the monthly salaries of labors under the provisions of Labor Pension Act. Under this plan, after contributing fixed amount to the Bureau of Labor Insurance, the Company will not assume the legal or constructive obligations of paying extra amount.

The pension expense under the defined contribution retirement funds of the Company in the year of 2021 and 2020 are NT$7,003,000 and NT$6,664,000 respectively, which have been contributed to the Bureau of Labor Insurance. (17) Income tax

1. The details of the income tax expenses of the Company are as follows:

Income tax expense for the period Income tax generated in the current period Surtax on undistributed retained earnings Adjustment of the income tax in the previous year Deferred income tax expense Occurrence and reversal of temporary difference Income tax expense	2021 $ 423,624 56,192 (14,104)	2020 380,186 22,374 (2,084)
	465,712	400,476
	2,538	6,535
	$ 468,250	407,011

The income tax expenses (profit) of the Company recognized in other comprehensive income in 2021 and in 2020 are as follows:

Components of other comprehensive income that will not be reclassified to profit or loss: Remeasurement of defined benefit plan	2021 $ 770	2020 (1,520)

103

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

The reconciliation of the relationship between the income tax expense (profit) and the net profit before tax of the Company in 2021 and in 2020 is as follows:

Net profit before tax Income tax calculated based on the tax rate of the place where the Company located Adjustments in accordance with tax laws Adjustment of current income tax for the prior period Surtax on undistributed retained earnings Total 2. Deferred tax assets and liabilities (1) Recognized deferred tax assets Losses from inventory price drop and obsolescence Unappropriated pension expenses Losses from the price drop of fixed assets and idle assets Refund liabilities and accounts payable Unrealized foreign exchange losses Remeasurement of defined benefit plan Deferred tax assets	2021 $ 3,940,451	2020 3,139,372
	788,090 (361,928) (14,104) 56,192	627,875 (241,154) (2,084) 22,374
	$ 468,250	407,011
	Dec. 31, 2021 $ 12,971 441 44 43,860 - 8,986	Dec. 31, 2020 9,101 478 44 43,368 823 9,758
	$ 66,302	63,572

104

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(2) Recognized deferred income tax liabilities

) Recognized deferred income tax liabilities
Unrealized profit on exchange Deferred income tax liabilities	Dec. 31, 2021 $ 6,038	Dec. 31, 2020
		-
	$ 6,038	-

3. Income tax approval

The approval on the filing of final income tax return of the Company has lasted till the year 2018 as required by the taxing authority.

(18) Capital and other equity

As of December 31, 2021 and 2020, the total authorized share capital of the Company was $1,550,000,000 dollars with a par value of $10 per share, and the actual amount issued was $1,059,779,000 and $1,034,779,000 dollars, separately.

In fiscal 2021, the Company issued 117 thousand new shares at par value for a total amount of $1,167 thousand due to the exercise of conversion rights by holders of convertible bonds. The number of shares issued is included in the certificates of bond-to-stock conversion of $1,167 thousand because the related legal registration procedures have not yet been completed.

On May 13, 2021, the Board of Directors resolved to issue 2,500 thousand shares at a par value of $10 per share at an issue price of $432 per share through cash capital increase, with September 17, 2021 as the base date for the capital increase. The capital increase was approved by the Financial Supervisory Commission and the legal registration procedures were completed on October 8, 2021.

1. Capital reserves

The components of the Company’s capital reserve are as follows:

Premium of issued shares Convertible bond conversion premium Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options Convertible bond stock options	Dec. 31, 2021 $ 4,628,739 72,562 370,540 40,330 171,527		Dec. 31, 2020 3,577,768 - 365,080 15,399 - 3,958,247
	$ 5,283,698

In accordance with the Company Act, capital surplus is required to cover losses first before new shares or cash can be issued in proportion to the shareholders’ original shares. Realized capital surplus referred to in the preceding paragraph includes premiums from the issuance of shares in excess of par value and proceeds from gifts received. In accordance with the Regulations Governing the Issuer’s Offerings and Issuance of Marketable Securities, the aggregate amount of capital surplus that may be capitalized each year shall not exceed 10% of the paid-in capital.

2. Retained earnings

In accordance with the Company’s Articles of Incorporation, the Company shall, after the final settlement of each year’s earnings, first complete tax contributions, make up for prior years’ deficits and set aside 10% as legal reserve, except when the legal reserve has reached the level of total capital; the Company is required by law to set aside or reverse special reserve. In the case of unappropriated earnings for the same period, the Board of Directors shall propose a proposal for the distribution of earnings to the shareholders for resolution, and the dividend to be distributed shall not be less than 20% of the net profit for the year after taxation, after deducting the net income provided for by law.

The Company will take into account the environment and growth of the Company and the distribution of earnings should take into account the Company’s future capital expenditure budget and capital requirements and pay cash dividends of not less than 10% of the dividends distributed in the current year.

(1) Legal reserve

If the Company has no deficit, it may, by resolution of the shareholders in general meeting, issue new shares or cash out of the legal reserve to the extent that such reserve exceeds 25% of the paid-in capital.

(2) Special reserve

105

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

When the Company distributes distributable earnings, a special reserve of the same amount is provided from current income and prior undistributed earnings for the net decrease in other shareholders’ equity that occurred during the year. When the 2019 earnings were appropriated in fiscal 2020, the appropriated special reserves were added to the current period’s earnings and the prior period’s unappropriated retained earnings, and when the 2020 earnings were appropriated in fiscal 2021, the appropriated special reserves were added to the current period’s profit after tax and the amount of items other than the current period’s profit after tax that were included in the current period’s unappropriated retained earnings and the prior period’s unappropriated retained earnings. If there is a decrease in shareholders’ equity accumulated in prior years, the same amount of special reserve from prior years’ undistributed earnings shall not be distributed. If there is a subsequent reversal in the number of other decreases in shareholders’ equity, the reversal may be distributed in the form of a surplus. (3) Earnings distribution

The appropriation of the Company’s 2020 earnings reached the legal resolution threshold through electronic voting on June 19, 2021, and was resolved at the shareholders’ meeting held on July 26, 2021. On June 19, 2020, the shareholders’ meeting resolved the appropriation of the 2019 earnings, and the dividends to be distributed to owners are as follows:

		2020			2019
	Payout ratio (NT$)		Amount	Payout ratio (NT$)		Amount
Distributed to the
holders of ordinary
shares:
Cash	$	13.30	1,376,256		10.50	1,086,518

On March 21, 2022, the Company’s board of directors proposed the following 2020 earnings distribution:

, , 2020 earnings distribution:
		2021
	Payout ratio (NT$)		Amount
Distributed to the holders of ordinary shares: Cash	$	16.00	1,695,646

Information on the distribution of earnings as proposed by the Board of Directors and resolved by the Shareholders’ Meeting is available on the “Public Information Observation Post System” 3. Other equity

Balance on January 1, 2021 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on December 31, 2021 Balance on January 1, 2020 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Disposal of equity instruments measured at FVTOCI	Exchange differences on translation of foreign operations $ (586,953) (82,102) -	Unrealized gain (loss) on financial assets measured at FVTOCI (8,019) - (5,259)	Total (594,972) (82,102) (5,259)
	$ (669,055)	(13,278)	(682,333)
	$ (631,970) 45,017 - -	(18,562) - 403 10,140	(650,532) 45,017 403 10,140

106

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Balance on December 31, 2020 $

(586,953) (8,019) (594,972)

(19) Share-based payment

The Company has the following share-based benefit transactions:

Cash capital increase reserved for employee subscription The Company Date of grant 2021.08.23 Number of grants 233 thousand shares Granted to Current employees of the Company Vesting conditions Immediate vesting

The estimated grant date fair value of the above cash capital increase retained for employee stock options was $107. The cost of employee compensation based on the shares generated from the cash capital increase retained for employee stock options was $24,931 thousand recognized in fiscal 2021.

(20) Earnings per share

The calculation of basic earnings per share and diluted earnings per share of the Company is as follows:

Basic earnings per share: Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Basic earnings per share Diluted earnings per share: Net profit attributable to the Company in the year Dilutive potential ordinary shares: Convertible bond Net income attributable to equity holders of the Company’s common stock (adjusted for the effect of dilutive potential common stock) Weighted average shares outstanding (1,000 shares) Dilutive potential ordinary shares: Bonuses for employees Convertible bond Weighted average common shares outstanding (adjusted for the effect of dilutive potential common stock) Diluted earnings per share evenue from contracts with customers 1. Disaggregation of revenue Major regional markets Taiwan Mainland China Other countries Main products/Line of service: DT Server	2021 $ 3,472,201	2021 $ 3,472,201	2020 2,732,361 103,478 26.41 2,732,361 - 2,732,361 103,478 272 - 103,750 26.34 2020 1,044,006 8,481,405 1,837,024 11,362,435 4,019,735 3,039,814
	104,204
	$ 33.32
	$ 3,472,201 664
	$ 3,472,865
	104,204 204 1,820
	106,228
	$ 32.69
	2021 $ 1,997,810 10,340,036 1,813,364
	$ 14,151,210
	$ 4,637,237 3,762,716

(21) Revenue from contracts with customers

107

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

NB Strategic Projects Automotive Other	2,885,202 2,529,275 2,069,644 1,375,267 152,983 80,338 643,428 318,006
	$ 14,151,210 11,362,435

2. Balance of contract

ance of contract
Contract liabilities	Dec. 31, 2021	Dec. 31, 2020 21,392	109.1.1 14,998
	$ 41,541

The beginning balances of contract liabilities as of January 1, 2021 and 2020 were recognized as income of NT$18,072,000 dollars and NT$13,710,000 dollars respectively. (22) Non-operating revenue/expense

1. Interest income

The details of interest income of the Company are as follows:

2021 Bank deposit interest $ 1,746 . Other income The details of other income of the Company are as follows: 2021 Income from molding $ 73,063 Income from compensation 12,765 Income from samples 7,142 Income from rentals 4,687 Income from subsidies 120 Other 2,131 $ 99,908 . Other gains and losses The details of other gains and losses of the Company are as follows: 2021 Foreign exchange gain or loss $ (72,885) Net profit or loss from financial assets (liabilities) measured at FVTPL: Derivatives: Forward exchange contracts 4,787 Metal product swap contracts 21,078 Embedded derivatives 2,700 Profit from the disposal of property, plant and equipment 467 Other (1,765) Total $ (45,618)	2021 Bank deposit interest $ 1,746 . Other income The details of other income of the Company are as follows: 2021 Income from molding $ 73,063 Income from compensation 12,765 Income from samples 7,142 Income from rentals 4,687 Income from subsidies 120 Other 2,131 $ 99,908 . Other gains and losses The details of other gains and losses of the Company are as follows: 2021 Foreign exchange gain or loss $ (72,885) Net profit or loss from financial assets (liabilities) measured at FVTPL: Derivatives: Forward exchange contracts 4,787 Metal product swap contracts 21,078 Embedded derivatives 2,700 Profit from the disposal of property, plant and equipment 467 Other (1,765) Total $ (45,618)	2020 10,165 2020 34,952 8,630 5,844 4,956 - 8,132 62,514 2020 (114,795) 7,620 4,346 - 136 (8,557)
	$ (72,885) 4,787 21,078 2,700 467 (1,765)
	$ (45,618)	(111,250)

2. Other income

3. Other gains and losses

4. Financial costs

. Financial costs	. Financial costs
The details of the financial cost of the Company are as follows: 2021 Interest expense Bank loans $ 3,216 Lease liabilities 1 Conversion of corporate bonds 3,530 6,747		2020 1,419 1 -
	$ 3,216 1 3,530
	6,747	1,420

(23) Compensation to employees, directors, and supervisors

In accordance with the Company’s Articles of Incorporation, no less than 3% of the Company’s annual profits shall be appropriated to the Compensation of Employees and no more than 3% to the Compensation of Directors and Supervisors; however, if the Company

108

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

has accumulated losses, it shall retain the amount of compensation in advance and appropriate the Compensation of Employees and Supervisors in proportion to the aforementioned. The former Compensation of employees to whom stock or cash is issued may include employees of a subordinate company who meet certain criteria.

The estimated amount of compensation of employees for the years ended December 31, 2021 and 2020 was $122,062,000 dollars and $97,235,000 dollars respectively, and the estimated amount of compensation to directors and supervisors was $4,480,000 dollars. The Company’s net profit before tax for the period is estimated by multiplying the amount of the Company’s net profit before issuing the compensation of employees and directors and supervisors by the proportion of the Company’s compensation distribution to employees and directors and supervisors as provided in the Company’s Articles of Incorporation and is reported as operating costs or expenses for that period. If there is a difference between the actual distribution amount and the estimated amount for the following year, the change in accounting estimate is adjusted and the difference is recognized in profit or loss for the following year. In the event that the Board of Directors resolves to grant a compensation of employees by way of stock, the number of shares of stock-based compensation is calculated based on the closing price of the common stock on the day before the Board of Directors’ resolution.

There was no difference between the amount resolved by the board of directors for employees’ and directors’ and supervisors’ compensation in 2020 and the amount estimated in the parent company only financial statements for year 2020. There was no difference between the amount resolved by the board of directors for employees’ and directors’ and supervisors’ compensation in 2021 and the amount estimated in the parent company only financial statements for the year 2021. The related information is available on the Market Observation Post System (MOPS).

(24) Information on financial instruments and fair value

1. Credit risk

(1) Credit risk exposure

The carrying amount of a financial asset represents the maximum amount of credit risk. The maximum amount of credit risk exposure was $6,649,442,000 dollars and $4,894,002,000 dollars as of December 31, 2021 and 2020 respectively.

(2) Credit risk concentration risk

In order to reduce the credit risk of accounts receivable, the Company continually evaluates the financial position of its customers and adjusts the terms of transactions between them if necessary. As of December 31, 2021 and 2020, the Company had 5 and 4 different customers with accounts receivable balances exceeding 5% of total accounts receivable for a single customer respectively. The Company periodically evaluates the probability of recovery of accounts receivable and presents Provisions, and the total loss is always within management’s expectations.

(3) Impairment loss

The Company uses a simplified method of estimating expected credit losses for all of its notes and accounts receivable, which is to measure expected credit losses over the life of the notes and accounts receivable, and for this purpose, the notes and accounts receivable are grouped by common credit risk characteristics that represent the ability of customers to pay all amounts due under contractual terms and are included in forward-looking information. The expected credit losses on the Company’s notes and accounts receivable are analyzed as follows:

Not past due 1-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due		Dec. 31, 2021	Expected credit loss in the duration of provision 203 504 110 - 13
	Book value of notes and accounts receivable $ 5,766,741 79,162 1,847 - 17	Weighted average expected credit loss rate 0.00% 0.64% 5.96% 26.64% 76.47%

109

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

More than 271 days past due Not past due 1-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due More than 271 days past due	1,374	100.00% Dec. 31, 2020	1,374
	$ 5,849,141		2,204
			Expected credit loss in the duration of provision 524 1,306 385 318 1 1,376
	Book value of notes and accounts receivable	Weighted average expected credit loss rate 0.01% 3.07% 12.53% 37.90% 50.00% 100.00%
	$ 4,275,318 42,585 3,363 839 2 1,376
	$ 4,323,483		3,910

The changes in the provisions for the notes and accounts receivable of the Company are as follows:

Opening balance Impairment loss (reversal of impairment loss) recognized Current period write-offs Closing balance	2021
	$ 2,204 3,910

2. Liquidity risk

The contracts of financial liabilities are sorted by their maturity dates as follows. The estimated interests are included, but the effect of net value agreement is excluded.

December 31, 2021 Non-derivative financial liabilities: Short-term loans Bonds payable Notes payable Accounts payable Accounts payable—related parties Other payables Other payables—related parties Lease liabilities December 31, 2020 Non-derivative financial liabilities: Notes payable Accounts payable Accounts payable—related parties Other payables Other payables—related parties	Book value $ 552,240 911,927 13,402 8,391 1,512,055 293,440 2,166 59	Cash flow from the contract 552,433 936,100 13,402 8,391 1,512,055 293,440 2,166 60	Within 6 months 552,433 - 13,402 8,391 1,512,055 293,440 2,166 30	6 12 months - - - - - - - 30	1-2years - - - - - - - -	2-5years - 936,100 - - - - - -	More than 5 years - - - - - - - -
	$ 3,293,680	3,318,047	2,381,917	30	-	936,100	-
	$ 2,712 11,421 2,034,411 299,122 2,092	2,712 11,421 2,034,411 299,122 2,092	2,712 11,421 2,034,411 299,122 2,092	- - - - -	- - - - -	- - - - -	- - - - -
	$ 2,349,758	2,349,758	2,349,758	-	-	-	-

The Company does not anticipate that the cash flows analyzed at maturity date will alter significantly or that the actual amounts will vary significantly.

1. Market risk—exchange rate risk

110

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(1) Exposure to exchange rate risk

The Company’s financial assets and liabilities exposed to significant foreign currency exchange rate risk are as follows:

	Financial assets Currency USD RMB HKD JPY EURO INR Long-term equity investment accounted for using the equity method USD EURO VND Financial liabilities Currency USD RMB EURO Financial assets Currency USD RMB HKD JPY EURO INR VND Long-term equity investment accounted for using the equity method USD EURO Financial liabilities Currency USD RMB HKD EURO		Dec. 31, 2021
		$ $	Foreign currency 155,306 90,966 4,407 8 1,067 4 3,662,009 321,978 116 77,250 71 1,915 3

Because the Company has a wide range of functional currencies, it has adopted a consolidated approach to disclose exchange gain or loss on monetary items, with foreign currency exchange gains (realized and unrealized) of $72,885,000 dollars and $114,795,000 dollars for the years ended 2021 and 2020 respectively. (2) Sensitivity analysis

The Company’s exchange rate risk primarily comes from foreign currency-denominated cash and cash equivalents, financial assets measured at FVTPL, accounts receivable and other receivables, loans, accounts payable and other payables, resulting into gains and losses of conversion of foreign currency when exchanging. As of December 31, 2021 and 2020, if NTD had depreciated or appreciated by 1% relative

111

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

to foreign currencies held by the Company and all other factors remained constant, net income would have increased or decreased by $35,100,000 dollars and $21,365,000 dollars respectively for 2021 and 2020. The same basis is used for both phases of analysis.

1. Market risk—changes in interest rates

The Company’s interest rate risk arises primarily from variable rate bank deposits and short-term loans, and changes in interest rates will cause future cash flows to fluctuate as the effective interest rates on bank deposits and short-term loans.

The following Sensitivity analysis was determined based on the interest rate risk of the financial instruments on the reporting date. For floating-rate liabilities, the analysis is based on the assumption that the amount of the liability outstanding at the reporting date is outstanding for the entire year. The rate of change used in the Company’s internal reporting of interest rates to key management is a 1% increase or decrease in interest rates, which also represents management’s assessment of the range of reasonably possible changes in interest rates.

The Company’s financial assets with variable interest rates as of December 31, 2021 and 2020 were $725,290,000 dollars and $496,950,000 dollars respectively. If interest rates had increased or decreased by 1%, the Company’s net income would have increased or decreased by $5,802,000 dollars and decreased or increased by $3,976,000 dollars for 2021 and 2020, respectively, with all other variables held constant.

1. Market risk - fair value

2. (1) Fair value and carrying amount

The Company’s management believes that the fair value of non-derivative short-term financial instruments shall be estimated using their book value on the balance sheet because of the near maturity of such instruments and their book value should be a reasonable basis for estimating fair value. This method is applied to cash and cash equivalents, notes receivable, accounts payable, other receivables and other payables, deposit margin and short-term borrowings.

In addition to the above financial instruments, the fair value and book value information of the remaining financial instruments and investment real estate of the company on the financial reporting date are as follows:

company on the financial reporting	date are as follows:	date are as follows:
Measured at fair value: Financial assets: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Non-financial assets: Investment property	Dec. 31, 2021
	Book value $ 3,370 9,500 300,256	Fair value

• (2) The evaluation techniques used to determine fair value are as follows:

• A. If there is an active market for a financial asset, the fair value is based on the market price. If market prices are not available, quoted prices from counterparties or estimates using valuation techniques are used. The estimates and assumptions used are consistent with those used by market participants in pricing financial instruments.

• B. The fair value of investment properties is based on independent evaluators with recognized professional qualifications and recent experience in the area and type of investment properties evaluated.

• (3) Fair value hierarchy:

The following table analyzes the fair value hierarchy of financial instruments and investment property by valuation. Each fair value hierarchy is defined as follows: A. Level 1: Publicly quoted prices (unadjusted) in an active market for identical assets or liabilities.

• B. Level 2: Input parameters for an asset or liability are observable either directly

• (i.e., prices) or indirectly (i.e., derived from prices), except for publicly quoted

112

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

prices included in Level 1.

C. Level 3: Input parameters for an asset or liability are not based on observable market information (non-observable parameters).

December 31, 2021 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property December 31, 2020 Measured at fair value: Financial assets measured at FVTPL Not measured at fair value: Investment property (4) Table of changes in financial Name Opening balance Financial assets measured at FVTPL $ 2,080 Financial assets measured at FVTOCI - $ 2,080 Name Opening balance Financial assets measured at FVTPL $ -	December 31, 2021 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property December 31, 2020 Measured at fair value: Financial assets measured at FVTPL Not measured at fair value: Investment property (4) Table of changes in financial Name Opening balance Financial assets measured at FVTPL $ 2,080 Financial assets measured at FVTOCI - $ 2,080 Name Opening balance Financial assets measured at FVTPL $ -	December 31, 2021 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property December 31, 2020 Measured at fair value: Financial assets measured at FVTPL Not measured at fair value: Investment property (4) Table of changes in financial Name Opening balance Financial assets measured at FVTPL $ 2,080 Financial assets measured at FVTOCI - $ 2,080 Name Opening balance Financial assets measured at FVTPL $ -	December 31, 2021 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property December 31, 2020 Measured at fair value: Financial assets measured at FVTPL Not measured at fair value: Investment property (4) Table of changes in financial Name Opening balance Financial assets measured at FVTPL $ 2,080 Financial assets measured at FVTOCI - $ 2,080 Name Opening balance Financial assets measured at FVTPL $ -	Level 1 Level 2 $ - - - - $ - - $ - - $ - - $ - - assets (liabilities) classifie 2021	Level 1 $ - -	Level 1 $ - -	Level 1 $ - -	Level 2 - -	Level 2 - -	Level 2 - -	Level 2 - -	Level 2 - -	Level 3 3,370 9,500	Level 3 3,370 9,500	Level 3 3,370 9,500	Total 3,370 9,500	Total 3,370 9,500
					$ -					-			12,870			12,870
					$ -					-			390,082			390,082
					$ -					-			2,080			2,080
					$ -					-			372,159			372,159
										classifie 2021
		$	Opening balance 2,080 - 2,080	Total profit or loss Recognized in profit or loss Recognized in other comprehensive income 2,700 - - (4,900) 2,700 (4,900)						Iss	Increase in	the period Transfers into Level 3 - -		Decrease in the period Sale, disposal or
	Financial assets measured at FVTPL Financial assets measured at FVTOCI Name														settlement (2,310) -		3,370 9,500
							income - (4,900)
		$					(4,900)				15,300	-			(2,310)		12,870
											2020						Closing balance
		$	Opening balance -	Profit Recognized in profit or loss 2,080		Profit	or loss Recognized in other comprehensive			Pu	Increase in	the period Transfers into Level 3 -		Decrease in the period Sale, disposal or
											rchase -
	Financial assets measured at FVTPL														settlement -		2,080
							income -

The above included gains and losses are reported in “other gains and losses” and “unrealized valuation gains (losses) on financial assets at FVTOCI”, which relate to assets still held as of December 31, 2021 and 2020 as follows:

Total gain or loss Recognized in profit (losses) (reported in “other gains and losses”) Recognized in other comprehensive income (reported in “unrealized valuation gains (losses) on financial assets at FVTOCI”)	2021 $ 2,527 (4,900)	2020
		2,080 -

(5) Quantitative information on fair value measurements of significant unobservable inputs (Level 3)

The Company’s financial assets at FVTPL, which are classified as Level 3, amounted to $2,080 thousand as of December 31, 2020. The Company does not disclose quantitative information because there is no active market for publicly quoted prices with reference to counter-party quotes and because it is not practicable to fully grasp the relationship between significant unobservable inputs and fair values. The remaining quantitative information for significant unobservable inputs measured at fair value for Level 3 is presented below:

113

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Item Financial assets measured at FVTPL - Embedded derivatives - right of redemption Financial assets measured at FVTOCI - investment in equity instruments with no active market “	Valuation techniques Binary tree method for pricing convertible bond Comparable company analysis Net asset value approach	Significant unobservable inputs ‧Volatility on Dec. 31, 2021: 38.95% ‧Net market value multiplier on Dec. 31, 2021: 2.05 ‧Lack of marketability discount on Dec. 31, 2021: 15.80% ‧Net asset value	Relationship between significant unobservable inputs and fair value
			‧The higher the volatility, the higher the fair value ‧The higher the multiplier, the higher the fair value ‧The higher the discount for lack of marketability, the lower the fair value ‧The fair value is positively correlated

(6) Valuation process for fair value classified in Level 3

The Company uses unobservable inputs for its fair value measurements and classifies its fair value in Level 3. The source of the input value for this level is the price provided by reference to counterparty quotations or market comparable companies’ net market value multipliers, etc., and the relevant quotations and valuation information are appropriately maintained. The results are subsequently reviewed to ensure consistency with the valuation sources and the reasonableness of the valuation results.

(7) Sensitivity analysis of fair value to reasonably possible alternative assumptions for Level 3 fair value measurements

The Company’s fair value measurements of financial instruments are reasonable, but the use of different valuation models or valuation parameters may result in different valuation results. For financial instruments classified in Level 3, if the valuation parameters are changed, the impact on the profit or loss or other comprehensive income for the period is as follows:

December 31, 2021 Financial assets measured at FVTPL Embedded derivatives - right of redemption Financial assets measured at FVTOCI Investments in equity instruments with no active market	Upward or downward changes Fair value changes reflected in profit or loss for the period Fair value changes reflected in other comprehensive income Input value Favorable changes Unfavorable changes Favorable changes Unfavorable changes	r Fair value changes reflected in profit or loss for the period Fair value changes reflected in other comprehensive income
	Volatility 5% $ 2,527 (936) - - Stock price 10% 1,030 (1,030) - - Net market value multiplier 8% - - 136 (137) Lack of marketabilit y discount 8% - - 136 (137)

Favorable and unfavorable changes in fair value represent fluctuations in fair value, which are calculated using valuation techniques based on various degrees of

114

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

unobservable input parameters. If the fair value of a financial instrument is affected by more than one input, the above table reflects only the effect of changes in a single input and does not take into account the correlation and variability among the inputs.

(25) Financial risk management

1. The Company is exposed to the following risks from the engagement of financial instruments:

2. (1) Credit risk

3. (2) Liquidity risk

4. (3) Market risk

This note presents the Company’s risk information for each of these risks and the Company’s objectives, policies and procedures for measuring and managing risk. For further quantitative disclosures, please refer to the respective notes to the parent company only financial statements.

1. Risk management structure

The Chairman has the sole responsibility for establishing and overseeing the Company’s risk management structure and reports regularly to the Board on its operations. The Company’s risk management policy is designed to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor compliance with the risks and risk limits. The Company develops a disciplined and constructive control environment through training, management guidelines and operating procedures to enable all employees to understand their roles and responsibilities.

The Board of Directors of the Company oversees how management monitors compliance with the Company’s risk management policies and procedures and reviews the appropriateness of the Company’s risk management framework in relation to the risks it is exposed to. Internal auditors assist the Company’s Board of Directors in its oversight role. These personnel conduct regular and exceptional reviews of risk management controls and procedures and report the results of these reviews to the Board of Directors.

3. Credit risk

Credit risk is the risk of financial loss arising from the failure of the Company’s customers or counterparties to fulfill their contractual obligations, mainly from the Company’s accounts receivable from customers and investments in securities.

(1)Accounts receivable and other receivables

The Company’s credit risk exposures are primarily depended on each customer’s individual circumstances. However, management also considers statistical information about the Company’s customer base, including the risk of default in the customer’s industry and country, as these factors may affect credit risk. Approximately 73% and 75% of the Company’s revenue for 2021 and 2020, respectively, were derived from sales to customers in Mainland China, which resulted in a significant concentration of regional credit risk.

The Company has established a credit policy whereby the Company is required to analyze the credit rating of each new customer individually before granting standard payment and delivery terms. Credit sales limits are established on an individual customer basis and are reviewed periodically; customers who do not meet the Group’s benchmark credit rating may only transact business with the Company on a pre-collection basis.

In monitoring customers’ credit risk, customers are grouped according to their credit characteristics, including whether they are individuals or legal entities, age of accounts, maturity dates and pre-existing financial difficulties. The Company maintains a Provisions account to reflect estimates of losses on accounts receivable and other receivables.

(2) Use of funds

The Company’s investments in equity securities are placed through a centralized trading market and therefore have no significant credit transaction risk.

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and reported to the Chairman of the Board of Directors by the Company’s finance department. Since the Company’s counterparties are creditworthy banks and financial institutions with investment grade or above, there are no significant performance concerns and therefore no significant credit risk.

4. Liquidity risk

Liquidity risk is the risk that the Company will not be able to deliver cash or other

115

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

financial assets to settle its financial liabilities and will not be able to meet its related obligations. The Company’s approach to manage liquidity risk is to ensure that the Company has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances and that there is no risk of unacceptable loss or damage to the Company’s reputation. In addition, the Company has entered into unused borrowing lines totaling $1,207,600,000 as of December 31, 2021 to cover unanticipated payments.

1. Market risk

Market risk is the risk that changes in market prices, such as changes in exchange rates, interest rates, and prices of equity instruments, will affect the Company’s revenue or the value of financial instruments held by the Company. The objective of market risk management is to manage the exposure to market risk to an acceptable level and to optimize investment returns.

The Company engages in derivative transactions in order to manage market risk. All transactions are executed in accordance with the guidelines of the Board of Directors. (1) Exchange rate risk

The Company uses derivative transactions to hedge exchange rate risk due to its exposure to exchange rate risk arising from sales and purchase transactions that are not denominated in the Company’s functional currency. Gains or losses on foreign currency assets and liabilities arising from changes in exchange rates are largely offset against natural hedges. Derivative transactions can help the Company reduce, but still not completely eliminate, the impact of changes in foreign currency exchange rates.

The Company periodically reviews individual foreign currency assets and liabilities for exposures and hedges against such exposures.

(2) Interest rate risk

The Company’s interest rate risk arises primarily from variable rate bank deposits and short-term loans, and changes in interest rates will cause future cash flows to fluctuate as the effective interest rates on bank deposits and short-term loans change.

(3) Equity instrument price risk

If the price of equity securities changes at the reporting date (the same basis is used for both periods of analysis and other changes are assumed to be constant), the effect on the consolidated profit and loss items would be as follows:

Price of securities on reporting date Up by 1% Down by1%
	Other comprehensive income after tax $ 95					Other comprehensi ve income after tax -
	$ (95)			-			-	-

(26) Capital management

It is the Board’s policy to maintain a sound capital base to maintain the confidence of investors, creditors and the market and to support the development of future operations. Capital consists of the Company’s share capital, capital surplus and retained earnings. The Board of Directors controls the rate of return on capital and also controls the level of dividends on ordinary shares.

In order to maintain or adjust its capital structure, the Company may adjust dividends paid to shareholders, reduce capital to refund shareholders, issue new shares or sell assets to settle liabilities.

The Company controls its capital on a debt-to-capital ratio basis. The ratio is calculated by dividing net debt by total capital. Net debt is total liabilities less cash and cash equivalents as shown on the balance sheet. Total capital represents all components of equity (i.e., equity, capital surplus, retained earnings and other equity) plus net debt. The debt-to-capital ratio at the reporting date is as follows:

Total liabilities Less: Cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	Dec. 31, 2021 $ 3,939,800 (779,913)	Dec. 31, 2021 $ 3,939,800 (779,913)		Dec. 31, 2020 2,895,843 (497,302) 2,398,541 13,499,198 15.09%
	$ 3,159,887
	$ 16,862,589
		15.78%

116

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(27) Investment and fund-raising activities for non-cash transactions

Please refer to Notes VI (7) and VI (12) for information on the Company’s non-cash trading investments and fundraising activities for Right-of-use assets acquired under leases in 2021 and 2020.

The reconciliation of the Company’s liabilities from fundraising activities for the years ended December 31, 2021 and 2020 was as follows:

Short-term loans Bonds payable Lease liabilities Total liabilities from financing activities	Jan. 1, 2021 Cash flow	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2021
	$ - 553,065 - 1,152,983 - (60)	- (825) - 552,240 (241,056) - - 911,927 119 - - 59
	$ - 1,705,988	(240,937) (825) - 1,464,226

Lease liabilities Total liabilities from financing activities	Jan. 1, 2020 Cash flow	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2020
	$ 59 (60)	1 - - -
	$ 59 (60)	1 - - -

VII. Related Party Transactions

(1) Parent company and ultimate controller: The Company is the ultimate controller of the

Company and the Company’s subsidiaries.

• (2) Names and relationships of related parties

The Company’s subsidiaries and other related parties that had transactions with the Company during the period covered by these parent company only financial statements are as follows:

Name of related parties Relationship with the Company Lotes Investments Limited A subsidiary of the Company Good Hope Investments Limited A subsidiary of the Company Guansi Development Co., Ltd. A subsidiary of the Company Zhaxi Investment Co., Ltd. A subsidiary of the Company Jiayu Investment Co., Ltd. A subsidiary of the Company Lotes USA, Inc A subsidiary of the Company LOTES EU GmbH A subsidiary of the Company Lerain Technology Co., Ltd. A subsidiary of the Company Mikronpoint Co., Ltd. A subsidiary of the Company Lotes Viet Nam CO., Ltd. A subsidiary of the Company Loteson International Investments A subsidiary of the Company Limited Lotes Guangzhou Co., Ltd. A subsidiary of the Company Lotes Hengnan Co., Ltd. A subsidiary of the Company Shenzhen DeYi Automation Equipment A subsidiary of the Company Co., Ltd. Lotes Zhongshan Co., Ltd. A subsidiary of the Company Zhongshan Dezhi Metal Surface A subsidiary of the Company Treatment Co., Ltd. Zhongshan Jinmeida Metal Surface A subsidiary of the Company Treatment Co., Ltd. Guangzhou Leside Technology Co., Ltd. A subsidiary of the Company Hengnan Deyi Property Development A subsidiary of the Company Co., Ltd. Chongqing Fuxinrui Electronic A subsidiary of the Company Technology Co., Ltd.

117

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Xincheng Development Co., Ltd. A subsidiary of the Company REKA Technology Co., Ltd. A subsidiary of the Company Jae You Co., Ltd. A subsidiary of the Company Lotes Suzhou Co., Ltd. A subsidiary of the Company Wangden Investments Limited A subsidiary of the Company Zongka Technology (Shenzhen) Co., A subsidiary of the Company Ltd. Ememe Robot Co., Ltd. A subsidiary of the Company Compertum Microsystems Inc. A subsidiary of the Company Good News Medical Co., Ltd. A subsidiary of the Company Lintes Technology Co., Ltd. A subsidiary of the Company Jilong Co., Ltd. A subsidiary of the Company Rihui Co., Ltd. A subsidiary of the Company Lintes Technology (Suzhou) Co., Ltd. A subsidiary of the Company Jiajun Investment Co., Ltd. (Note) A subsidiary of the Company Genie Precision Machine Co., Ltd. A subsidiary of the Company Key management personnel Including the directors, supervisors, managers and their families and spouses

Note: Jiajun Investment Co., Ltd. was liquidated and eliminated in the fourth quarter of 2021.

• (3) Material transactions with the related parties

• Operating revenue

Note: Jiajun Investment Co., Ltd. was liquidated and eliminated in the fourth quarter of 21. aterial transactions with the related parties Operating revenue	Note: Jiajun Investment Co., Ltd. was liquidated and eliminated in the fourth quarter of 21. aterial transactions with the related parties Operating revenue	Note: Jiajun Investment Co., Ltd. was liquidated and eliminated in the fourth quarter of 21. aterial transactions with the related parties Operating revenue	Note: Jiajun Investment Co., Ltd. was liquidated and eliminated in the fourth quarter of 21. aterial transactions with the related parties Operating revenue
The amounts of material sales from the Company to the related parties are as follows:
		2021	2020
Other subsidiaries	$	58,659	26,270

The terms of sale of the Company to a subsidiary of the Company are not significantly different from the normal sales price. Their collection periods are all three months. Receivables from related parties are not covered by collateral.

1. Purchase

The amounts of goods purchased by the Company from the related parties are as follows:

follows:
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Other subsidiaries	2021 $ 1,379,153 10,140,753 122,694	2020 1,257,559 7,574,556 42,463 8,874,578
	$ 11,642,600

The Company’s purchase price to the above company is not significantly different from the Company’s purchase price to general suppliers. The payment terms are three to four months, which are not significantly different from those of general suppliers.

3. Accounts receivable from related parties

The details of the accounts receivable from related parties are as follows:

Accounting item	Type of related party	Dec. 31, 2021 $ 30,353 2,274 160 2,272 - - (2,272)	Dec. 31, 2020 12,077 935 - 2,272 87,623 266 - 103,173
Accounts receivable Accounts receivable Other receivables Other receivables Other receivables Other receivables Allowance for losses	REKA Technology Co., Ltd. Other subsidiaries Lerain Technology Co., Ltd. Ememe Robot Co., Ltd. Lotes Guangzhou Co., Ltd.(註) Other subsidiaries Ememe Robot Co., Ltd.
		$ 32,787

Note: The amount of other receivables included $0 thousand and $87,296 thousand as of

118

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

December 31, 2021 and 2020, respectively, for the Company’s loan to Lotes Guangzhou Co. The Company’s capital loans to subsidiaries were based on the interest rate of 4.5% on the loans from financial institutions in the year of appropriation, and the Company recognized interest income of $1,306 thousand and $4,122 thousand in fiscal 2021 and 2020, respectively.

4. Accounts payable from related parties

The details of the Accounting item	accounts payable from related parties are as follows: Type of related party Dec. 31, 2021 Dec. 31, 2020 Xincheng Development Co., Ltd. $ 383,959 288,985 REKA Technology Co., Ltd. 1,060,674 1,728,149 Other subsidiaries 67,422 17,277 LOTES USA 2,166 2,092 $ 1,514,221 2,036,503	accounts payable from related parties are as follows: Type of related party Dec. 31, 2021 Dec. 31, 2020 Xincheng Development Co., Ltd. $ 383,959 288,985 REKA Technology Co., Ltd. 1,060,674 1,728,149 Other subsidiaries 67,422 17,277 LOTES USA 2,166 2,092 $ 1,514,221 2,036,503
Accounts payable Accounts payable Accounts payable Other payables	Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Other subsidiaries LOTES USA
		$ 1,514,221

5. Endorsement

The balance and details of the endorsement and guarantee provided by the Company to the related parties are as follows:

Lerain Technology Co., Ltd. Lotes Guangzhou Co., Ltd. REKA Technology Co., Ltd. . Promotion expense Other subsidiaries Mainly the sample fees. . Administration expense Other subsidiaries Mainly the service fees. . Non-operating income Other subsidiaries	Dec. 31, 2021 $ 100,000 498,240 311,800		Dec. 31, 2020 - 227,840 35,000 262,840 Dec. 31, 2020 237 Dec. 31, 2020 59,674 Dec. 31, 2020 4,567
	$ 910,040
	Dec. 31, 2021 $ 3,436
	Dec. 31, 2021 $ 37,419
	Dec. 31, 2021 $ 2,184

6. Promotion expense

7. Administration expense

8. Non-operating income

Mainly the income from the rentals of offices leased and the interest income from the loans to subsidiaries.

9. Lease

The Company leases warehouses from major management personnel and enters into one-year lease contracts with a total value of $60,000,000 with reference to the neighboring warehouse rental quotes. The interest expenses of $1,000 and $1,000 were respectively recognized in 2021 and 2020, and the balance of Lease liabilities as of December 31, 2021 and 2020 were respectively $59,000 and $0.

(4) Major management personnel transactions

Related compensation includes:

, , Major management personnel transactions Related compensation includes:
Short-term employee benefits Post-employment benefits Share-based payment	2021 $ 41,554 1,029 2,087	2020 48,136 1,082 - 49,218
	$ 44,670

VIII. Pledged Assets

As of December 31, 2021 and 2020, some of the loan contracts of property, plant and equipment guaranteed by financial institutions had expired and were not renewed, and the banks’

119

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

certificates of settlement had been obtained, but the pledges had not yet been cancelled. The carrying value of the land was $28,250 thousand, and the carrying value of the buildings was $14,562 thousand and $15,465 thousand, respectively.

• IX. Significant Contingent Liabilities and Unrecognized Contractual Commitments

(1) Significant unrecognized contractual commitments:

• The amount of information system related contracts executed and outstanding as of

• December 31, 2021 was approximately $10,969,000 dollars.

• (2) The issuance of guarantee notes for bank loans, financing lines and derivative financial commodity transactions:

Dec. 31, 2021 Dec. 31, 2020 $ 2,197,360 1,570,240

Guaranteed notes

X. Significant Disaster Loss: None.

Xi. Significant Post-Period Events: None

XII. Others

• (1) Employee benefits, depreciation, depletion, and amortization functions are summarized below:

below:
Function Nature	2021			2020
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salary expenses Labor insurance and health insurance expenses Pension expenses Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	17,167 1,194 470 - 1,780 79 12	274,228 12,352 7,365 4,425 11,943 6,941 25,889	291,395 13,546 7,835 4,425 13,723 7,020 25,901	15,927 867 378 - 1,382 41 3	238,773 10,020 7,216 3,940 10,069 7,233 11,775	254,700 10,887 7,594 3,940 11,451 7,274 11,778

Additional information on the number of employees and employee benefit costs for 2021 and 2020 is as follows:

Number of employees Number of directors who were not employees of the Company Average employee benefit expenses Average employee salary expenses Adjustment of average employee salary expenses Remuneration for supervisors	2021 146	2021 146	2020 135
	5		5
	$ 2,316		2,189
	$ 2,067		1,959
		5.51%	657
		$ 483

Information on the Company’s remuneration policy (including the policy for the

120

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

remuneration of directors, supervisors, managers and employees) is as follows.

1. Remuneration for directors and supervisors is paid in accordance with the Company’s

remuneration policy for directors and supervisors.

1. The bonuses and dividends for managers and employees are based on the Company’s

operating conditions, personal duties and performance.

1. The salaries of the directors and supervisors are adjusted in a timely manner to meet

their responsibilities.

XIII. Disclosing Information

• (1) Major Transaction Details

In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the Company should disclose the following information about significant transactions in 2021:

1. Capital lending to others:

Unit: NT$/Foreign currency 1,000

No.	Lender	Borrower	Item	Related party	Max amount for the period	Closing balance	Actual amount	Interest rate	Nature of the lending (Note 1)	Transaction amount	Purpose for lending	Allowance for bad debt	Collateral	Collateral	Lending limit for single party (Note 2)	Overall lending limit (Note 2)
													Name	Value
0	The Company	Lotes Guangzhou Co.,Ltd.	Internal transaction	Yes	219,365 (RMB50,000)	217,355 (RMB50,000)	-	5%	2	-	Working capital	-	None	-	3,372,496	6,744,992

Note 1: The following are the descriptions of the funds lending.

• (1) Those who have business dealings.

• (2) When there is a need for short-term financing.

• Note 2: The amount of the Company’s financing to a single party shall not exceed 20% of the Company’s net worth.

The total amount of funds lent by the Company to others shall not exceed 40% of the Company’s net worth.

2. Endorsement:

Unit: NT$/Foreign currency 1,000

No.	Endorsement provider	Endorsee	Endorsee	Ceiling on amount of endorsement for an enterprise (Note 2)	Balance of the ceiling endorsement fee in the period	Ending balance of the endorsement fee	Amount actually used	Amount of endorsemen t backed by assets	Percentage of the accumulated amount of endorsement in the net value of current financial statement (%)	Ceiling on amount of endorsement (Note 2)	Endorsement made by parent company to subsidiary	Endorsement made by subsidiary to parent company	Endorseme nt made to any party in Mainland China
		Company Name	Relationship (Note 1)
0 0 0 1 2 2	The Company “ “ Lotes Guangzhou Co., Ltd. Lintes Technology Co., Ltd. “	REKA Technology Co., Ltd. Lotes Guangzhou Co., Ltd. Lerain Technology Co., Ltd. REKA Technology Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Genie Precision Machine Co., Ltd.	2 2 2 1 2 2	3,372,496 3,372,496 3,372,496 1,348,251 846,831 846,831	311,800 501,300 (USD18,000) 100,000 85,605 (USD3,000) 114,140 (USD4,000) 126,600	311,800 498,240 (USD18,000) 100,000 83,040 (USD3,000) - 126,600	- 274,032 - - - 44,405	- - - - - -	1.85% 2.95% 0.59% 1.23% - 7.47%	8,431,241 8,431,241 8,431,241 3,370,628 1,693,662 1,693,662	Yes “ “ No “ “	No “ “ “ “ “	No Yes No No Yes No

• Note 1: There are seven types of relationship between the Endorser and Endorsee, which can be marked: (1) Companies with business dealings.

• (2) Companies in which the company directly and indirectly holds more than 50% of the voting rights.

• (3) Companies that hold more than 50% of the voting rights in the company, both directly and

121

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

indirectly.

(4) The Company owns, directly and indirectly, more than 90 percent of the voting shares.

(5) Company that is mutually insured under a contract between its peers or co-manufacturers based on the need to perform the work.

(6) Company in which all of the contributory shareholders have given their endorsement in proportion to their shareholding in the joint venture.

(7) Intercompany performance guarantees and guarantees for pre-sale contracts in accordance with the Consumer Protection Act.

Note 2: (1) The amount of the Company’s guarantee for a single corporate endorsement shall not exceed 20% of the net worth of the Company 。

The aggregate amount of the Company’s guarantees under external endorsement shall not exceed 50% of the net worth of the Company.

(2) The amount of Lotes Guanghou Co., Ltd’s guarantee for a single corporate endorsement is limited to not more than 20% of the net worth of the company.

The aggregate amount of Lotes Guanghou Co., Ltd’s external endorsement guarantees is limited to an amount not exceeding 50% of the Company’s net worth.

(3) The amount of Lintes Technology Co., Ltd.’s guarantee for a single corporate endorsement is limited to not more than 50% of the net worth of the company.

The aggregate amount of Lintes Technology Co., Ltd.’s external endorsement guarantees is limited to an amount not exceeding 100% of the Company’s net worth.

122

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

1. Securities held at the end of fiscal period (excluding the equity of controlled by subsidiaries, affiliated companies, or joint company):

				Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
Holding company	Category and name of security	Relationship with the issuer of the security	Accounting item	End of the period				Remark
				Shares	Book value	Shareholding raio	Fairvalue
Lotes Co., Ltd. “ Jiayu Investment Co., Ltd. “ “ “ “ “ “ “ Lintes Technology Co., Ltd.	SteadyBeat Technology Corporation G-sau Co.,Ltd Grand-Tek Technology Co., Ltd. TAIDOC TECHNOLOGY CORP. LIAN HONG ART CO., LTD. Patec Precision Industry Co., Ltd. OTO PHOTONICS, INC. LUCEMITEK CO., LTD. RADINET COMMUNICATIONS INC. AICP Technology Corporation Chailease Holding Company Limited Class A Preferred Shares	None “ “ “ “ “ “ “ “ “ “	Financial assets measured at FVTOCI - non-current “ Financial assets measured at FVTPL - current “ “ “ “ “ “ Financial assets measured at FVTOCI - current Financial assets measured at FVTOCI - non-current	950,000 300,000 382,980 25,000 1,017,000 477,000 1,368,800 1,169,977 600,000 400,000 202,000	8,5 9 22,2 4,5 51,5 13,3 - - - 1,4 20,5	9.90 % 13.64 % 1.56 % 0.03 % 2.94 % 1.04 % 4.57 % 17.33 % 26.25 % 5.33 % 0.13 %	8,545 955 22,251 4,538 51,592 13,356 - - - 1,456 20,503	Note Note Note

Note: All of them were recognized in losses.

1. The cumulative purchase or sale of the same securities amounted to at least NT$300 million or 20% of the paid-in capital: None.

2. Acquisition of real property amounting to NT$300 million or 20% or more of the paid-in capital:

							Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
The company which acquired the property	Name of asset	Date of occurrence	Amount of transaction (Note 2)	Payment condition (Note 2)	Counterparty of transaction	Relation	If the counterparty is a related party, the information of its previous transfer shall be provided				Reference for pricing	Purpose of the acquisition and the condition of use	Other agreed matters
							Owner	Relationship with the issuer	Date of transfer	Amount
Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd. Lotes Viet Nam CO., Ltd. Lintes Technology Co., Ltd.	Plant (Note 1) “ Land use rights Lands and buildings in parcel number 1159, Jiankang Rd., Zhonghe Dist., New Taipei City	2017.10 ~ 2021.12 2019.10 ~ 2021.12 2021.01.11 2020.12.16	1,698,815 344,644 299,921 237,700	1,081,38 307,04 215,64 237,70	Chongqing Chuangyou Construction Group, etc. “ GREEN i-PARK CORPORATION Natural person	None “ “ “	- - - -	- - - -	- - - -	- - - -	Tendering “ Negotiation Appraisal report from an appraisal firm	Construction of self-use plant “ “ Office (Note 3)	None “ “

Note 1: Build the factory by own contracting committee.

Note 2: The conversions were made at the exchange rates prevailing on the balance sheet date.

Note 3: To be used as an office after the decoration is completed.

1. Disposal of real property amounting to NT$300 million or 20% or more of paid-in capital: None.

123

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

1. The amount of sales to or from related parties is at least $100 million or 20% of the paid-in capital:

Unit: NT$ 1,000

The company which purchases (sells) products	Name of transaction counterparty	Relationship	Transaction status	Transaction status	Transaction status	Transaction status	Situation and reason for the conditions of transaction to be different from the ordinary ones	Situation and reason for the conditions of transaction to be different from the ordinary ones	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Remark
			Purchases (sales)	Amount	Percentage in total goods purchased (sold)	Credit period	Unit price	Credit period	Balance	Percentage in the notes and accounts receivable (payable)
Xincheng Development Co., Ltd. “ REKA Technology Co., Ltd. “ “ “ “ “ Lotes Guangzhou Co., Ltd. “ “ “ Lintes Technology (Suzhou) Co., Ltd. Lotes HengNan Co., Ltd. “ Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd.	The Company Lotes Suzhou Co., Ltd. The Company Lotes Guangzhou Co., Ltd. Lotes HengNan Co., Ltd. “ Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Lotes Zhongshan Co., Ltd. Lintes Technology Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Guangzhou Leside Technology Co., Ltd. “	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company “ “ “ “ The surrogate parent company are the same parent company “ “ “ Subsidiary The surrogate parent company are the same parent company “ “ “	Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net expense from the goods purchased “ Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net expense from the goods purchased “ “ “ Net revenue from the goods sold “ “ Net expense from the goods purchased “	1,379,153 1,436,269 10,140,753 10,115,863 667,963 450,692 2,555,583 1,143,684 2,328,977 377,560 191,278 118,523 1,841,200 371,002 158,660 828,419 365,906	95.70 % 99.67 % 74.41 % 75.65 % 5.00 % 3.31 % 19.11 % 8.55 % 31.67 % 5.13 % 1.81 % 1.12 % 96.35 % 28.40 % 12.15 % 79.75 % 41.26 %	Settled in 90 days “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “	- - - - - - - - - - - - - - - - -	No significant difference “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “	383,959 (404,902) 1,060,674 (1,258,218) (76,311) 103,230 (392,990) 570,213 (760,781) (37,829) (36,443) (54,089) 342,051 147,002 75,925 (380,925) (144,442)	94.51% (99.41)% 30.04% (51.39)% (3.12)% 2.92% (16.05)% 16.15% (42.14)% (2.10)% (2.02)% (3.00)% 96.10% 36.51% 18.86% (80.22)% (42.37)%

124

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

1. Amounts due from related parties amounting to at least NT$100 million or 20% of

paid-in capital:

paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:
					Unit: NT$1,000
Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivables from the related party	Turnover ratio	Past due receivables from the related party		Amounts due from related parties recovered after the period	Allowance for losses
					Amount	Handling
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. “ “ “ “ Lotes Suzhou Co., Ltd. Good Hope Investments Limited Lotes Guangzhou Co., Ltd. “ Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd. Guangzhou Leside Technology Co., Ltd. “ Lintes Technology (Suzhou) Co., Ltd.	The Company “ Lotes Guangzhou Co., Ltd. Lotes Hengnan Co., Ltd. Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. “ Lotes Zhongshan Co., Ltd. REKA Technology Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lintes Technology Co.,Ltd.	Subsidiary “ The surrogate parent company are the same parent company “ “ “ “ Parent company The surrogate parent company is the same parent company “ The surrogate parent company is the same parent company “ “ “ Subsidiary	383,959 1,060,674 760,781 103,230 161,474 570,213 404,902 855,894 1,258,218 647,560 392,990 147,002 380,925 144,442 342,051	4.10 7.27 4.38 4.92 - 4.01 4.03 - 8.40 - 8.95 2.93 4.35 5.07 5.15	- - - - - - - - - - - - - - -		102,440 1,060,665 194,533 29,101 - - 105,428 - 1,045,129 - 304,480 34,353 79,486 31,809 342,051	- - - - - - - - - - - - - - -

125

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

1. Engagement in derivative transactions: Please refer to Note VI (2) and (24).

2. (2) Information on reinvestment business:

Information on the Company’s investees in 2021 was as follows (excluding investees in China):

China):	China):	China):	China):
				Unit: NT$1,000
Name of the company investing	Name of investee company	Location	Main business	Original investment amount (Note 1)		Shares held at the end of the period			Gain/loss of investee company in the fiscal period	Gain/loss in the investment recognized in the fiscal period	Remark
				End of the period	End of the **previous year **	Shares	Ratio	Book value
The Company “ “ “ “ “ “ “ “ “ Lotes Investment Ltd. Good Hope Investments Limited “ Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. “ “ “ Lintes Technology Co., Ltd. “ “ “ “ Jilong Co., Ltd.	Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA, Inc. LOTES EU GmbH Lerain Technology Co., Ltd. Mikronpoint Co., Ltd. Lotes Viet Nam CO., Ltd. Loteson International Investments Limited Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Wangden Investments Limited Ememe Robot Co., Ltd. Compertum Microsystems Inc. Good News Medical Co., Ltd. Lintes Technology Co., Ltd. Jiajun Investment Co., Ltd. Genie Precision Machine Co., Ltd. Compertum Microsystems Inc. Lerain Technology Co., Ltd. Jilong Co., Ltd. Rihui Co., Ltd.	Samoa “ “ Anguilla Taiwan America Germany Taiwan “ Vietnam Hong Kong Samoa Hong Kong “ “ Taiwan “ “ “ “ “ “ “ Samoa Samoa	Holding and investment “ “ “ General investment Market development Market development Design, test and sale of chips Manufacturing and trading of mechanical equipment and electronic parts Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Sales of connectors for the information industry, communications industry, and consumer electronics industry Sales of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Holding and reinvestment Manufacturing of electrical and audio-visual electronic products Manufacturing of electronic components Manufacturing and sales of machinery and equipment, electronic components, and optical instruments Manufacturing of electronic parts and components, other electrical and electronic machinery and equipment General investment Manufacturing and sales of optical molds Manufacturing of electronic components Design, test and sale of chips Holding and reinvestment Holding and reinvestment	721,0 11,1 554,0 13,8 690,0 69,2 3,1 47,3 25,0 497,8 721,0 2,7 2,8 554,0 13,8 69,6 43,8 6,3 486,9 - 164,8 14,6 5,7 137,0 137,0	741,904 11,428 570,068 14,240 690,000 71,200 3,502 9,385 5,000 - 741,904 2,848 2,884 570,077 14,240 69,600 43,880 250 486,926 15,000 164,833 14,620 - 140,976 140,976	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 4,732,059 2,500,000 17,985,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 2,632,800 636,000 29,712,788 - 14,671,000 877,200 547,059 4,950,000 4,950,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 16.40% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 31.25% 25.44% 52.13% -% 60.00% 10.41% 1.90% 100.00% 100.00%	6,513,504 1,575,778 2,656,135 159,758 1,112,641 75,270 3,674 37,790 19,312 470,627 6,741,273 1,300 718,561 2,684,343 159,758 (8,099) 18,210 5,100 882,867 - 204,091 6,067 4,546 261,176 261,176	1,393,504 82,839 453,193 38,981 70,861 (3,360) (219) (29,164) (5,624) (26,387) 1,393,504 (278) 83,117 435,193 38,981 (341) (39,628) (3,774) 174,032 (13) 29,024 (39,628) (29,164) 30,332 30,332	1,331,683 82,839 426,750 38,981 69,007 (3,360) (219) (8,412) (5,624) (26,387) 1,393,504 (278) 83,117 435,193 38,981 (322) (13,766) (673) 90,719 (13) 16,556 (4,587) 149 1,147 1,147	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

Note 1: The original investment amount was converted into New Taiwan dollars using the exchange rate at the balance sheet date.

126

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Note 2: The investment income or loss recognized in the current period includes adjustments for unrealized gains or losses from intercompany transactions.

• (3) Investment in China:

• Names of investee companies in Mainland China, major business activities, and other related information:

Unit: NT$ 1,000

Name of investee company in Mainland China	Main business	Paid-in capital (Note 3)	Investment method (Note 1)	Accumulated investment amount remitted from Taiwan at the beginning of the fiscal period (Note 3)	Amount remitted or recovered	Amount remitted or recovered	Accumulated investment amount remitted from Taiwan at the end of the fiscal period (Note 3)	Gain/loss of investee company in the fiscal period	Shareholding ratio	Gain/loss in investment recognized in the fiscal period (Note 2)	Carrying amount of investment at the end of the fiscal period	Investment income remitted back to Taiwan by the end of the fiscal period
					Remitted	Recovered
Lotes Guangzhou Co., Ltd. Lotes Suzhou Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes HengNan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lotes Zhongshan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Zhongshan Jinmeida Metal Surface Treatment Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd.	Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry R&D of electronics, import and export of raw materials of plastic products and plastic products Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Development and production of the measurement instruments for optical communication, optical transceivers of 10GB/s or above and relevant technical support Manufacturing of robotic arms, automation equipment and relevant components Manufacturing connectors for telecommunication industry and for consumer electronics industry, and manufacturing of robotic arms, automation equipment and relevant components Surface treatment of metal products and plastic products Development of real estate, lease of premises, landscape design and interior decorating Surface treatment of metal products and plastic products Research, testing and development R&D and sales of electronic components, automobile components and accessories, computers and accessories, development of molds and the import and export of goods and technologies	739,0 553,3 13,8 962,8 137,0 108,6 1,869,2 265,1 99,9 29,4 20,4 6,9	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3) (3)	705,840 553,302 13,840 - 137,016 - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -	705,840 553,302 13,840 - 137,016 - - - - - - -	1,393,504 435,193 38,981 73,689 41,915 23,623 237,472 (539) (54) (962) 39,577 (1,555)	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	1,331,683 426,750 38,981 91,432 6,636 23,623 234,472 (539) (575) 889 39,577 (793)	6,513,462 2,656,082 159,758 1,288,404 161,083 134,271 2,155,532 249,292 98,249 96,050 57,105 1,448	- - - - - - - - - - - -

Note 1: There are six types of investments:

• (1) Investment in Chinese Corporation via Third Region Remittance.

• (2) Establishment of a company to reinvest in a continental company through a third regional investment.

• (3) Reinvest in Chinese companies by re-investing in existing companies in third regions.

• (4) Direct Investment

• (5) Others.

• (6) N/A.

Note 2: The investment gain or loss recognized in the current period has been reconciled with the unrealized gain or loss from intercompany transactions.

Note 3: The balance sheet date exchange rates are used to translate the paid-in capital and remittance of cumulative investment amounts into New Taiwan dollars.

2. Investment ceiling in Mainland China:

Company name	Accumulated amount remitted from Taiwan at the end of the fiscal period for investment in Mainland China (Note 1)	Investment amount approved by Investment Commission, MoEA (Note 1)	Investment ceiling in Mainland China according to the regulations made by Investment Commission, MoEA
Lotes Co., Ltd.	1,272,982,000	1,415,013,000	10,117,489,000
Lintes	137,016,000	137,016,000	1,016,197,000

127

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Technology Co., Ltd.

Note 1: The conversions to NTD were made at the exchange rates prevailing on the balance sheet date.

3. Significant transactions with the investee companies in China:

Please refer to the “Information on Significant Transactions” and “Business Relationships and Significant Transactions between Subsidiaries and Parents” for details of significant direct or indirect transactions between the Company and its investees in Mainland China in fiscal 2021, which have been eliminated in the preparation of the consolidated financial statements.

(4) Information on Major Shareholders:

nsolidated financial statements. mation on Major Shareholders:
Shares Name of Major Shareholder	Shares held	Shareholding %
Chin-Ling Investment Co., Ltd.	10,956,237	10.32%
Chia-Ming Investment Co., Ltd.	9,797,037	9.23%
New Labor Pension Fund 2nd Fuh Hwa Discretionary Investment Account in 2018	7,530,222	7.09%

Note:

(1) The information on major shareholders in this table is based on the last business day of each quarter and is calculated based on the total number of common shares and preferred shares held by shareholders who have completed the delivery of unregistered shares (including treasury shares) of the Company of at least 5%. The number of shares recorded in the Company’s financial statements and the actual number of shares delivered without physical registration may differ depending on the basis of computation.

(2) The above information is revealed by the trustee’s opening of a trust account with individual subaccounts of the principal if the shareholder has delivered his or her shares to the trust. As for any shareholder holding more than 10% of the shares of the Company in accordance with the Securities and Exchange Act, the shareholdings include its own shares plus the shares it has delivered to the trust and has the right to decide on the use of the trust property, etc. Please refer to the Market Observation Post System for information on insider shareholdings.

XIV. Segmental Information

Please refer to the consolidated financial statements for 2021.

128

Lotes Co., Ltd.

Statement of Cash and Cash Equivalents

December 31, 2021

Unit: NT$ 1,000

Item	Summary	Amount $ 52 375,802 349,670 725,472 50 54,339 54,389 $ 779,913
Cash and cash equivalents: Petty cash Checks and demand deposits: Time deposit: Total	NTD Foreign currency (USD10,923,219.52, HKD23,881.90, JPY91,560, EUR1,414,094.87, RMB671,575.06 and THB1.67) NTD Due date: February 19, 2022 Interest rate range: 0.795% Foreign currency (RMB12,500,000) Due date: January 8, 2022 Interest rate range: 2.4%

129

Statement of Notes Receivable

Item	Summary	Amount $ 913 585 115 298 $ 1,911
Non-related parties: A company B company C company Other (Note)

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

130

Lotes Co., Ltd.

Statement of Accounts Receivable

December 31, 2021

Unit: NT$ 1,000

Item	Summary	Amount $ 32,627
Accounts receivable - related parties Non-related parties: D company E company F company G company H company Other (Note) Less: allowance for losses
		$ 603,950 447,028 434,063 351,958 314,261 3,663,343
		5,814,603 (2,204)
		$ 5,812,399

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

Statement of Other Receivables

Item	Summary	Amount $ 2,432 (2,272) $ 160 $ 22,389 374 22,763 (279) $ 22,484
Related-parties Less: allowance for losses Non-related parties: Business tax credit and tax refund Other Subtotal Less: allowance for losses	Mainly receivables from mold development and estimated interest receivable

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

131

Lotes Co., Ltd.

Statement of Inventories

December 31, 2021

Unit: NT$ 1,000

Item Merchandises Finished goods Raw materials Subtotal Less: Allowance for decline in value of inventories and doubtful losses	Amount $ 1,057,288 3,379 43	Market price 993,764 2,061 29
	1,060,710 (64,856)	995,854
	$ 995,854

Note: Allowance for decline in value of inventories and allowance for doubtful accounts is based on the lower of cost or net realizable value and the ageing of inventories, respectively.

Statement of Prepayments

Item	Summary	Amount $ 1,360 1,056 304 $ 2,720
Prepayment of membership fee Prepayment Other (Note) Total	Mainly prepayment of annual association fee Mainly prepayment of product certification fee Mainly prepayment of miscellaneous expenses, etc.

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

132

Lotes Co., Ltd.

Statement of Changes in Financial Assets Measured at FVTPL - Non-Current

December 31, 2021

Unit: NT$ 1,000

Name of financial instruments Redemption rights of convertible bonds	Beginning of theperiod	Beginning of theperiod	Increa	se in theperiod	Decrea	se in theperiod	Ending of theperiod	Ending of theperiod	Provision of guarantees orpledges	Remark
	Shares	Fair value	Shares	Amount 3,600	Shares	Amount 230	Shares	Fair value
	-	$ -	-		-		-	3,370	None

Statement of Changes in Financial Assets Measured at FVTOCI - Non-Current

Unit: 1,000 Shares/NT$ 1,000

Name	Beginning of theperiod	Beginning of theperiod	Increas	e in theperiod	Decreas	e in theperiod	Ending	of theperiod	Accumulated impairment - - -	Provision of guarantees orpledges	Remark
	Shares	Fair value	Shares	Amount 8,545 955 9,500	Shares	Amount - - -	Shares	Fair value 8,545 955 9,500
SteadyBeat Technology Corporation G-sau Co.,Ltd	- -	$ - - $ -	950 300		- -		950 300			None None

133

Lotes Co., Ltd.

Statement of Changes in Investment Accounted for Using the Equity Method

January 1 to December 31, 2021

Unit: NT$ 1,000

Name	Opening balance	Opening balance	Increase in the period (Note)	Increase in the period (Note)	Decrease in the period (Note)	Decrease in the period (Note)		Closing balance		Market value or net equity	Market value or net equity	Provision of guarantees orpledges	Remark
	Shares Amount		Shares Amount		Shares	Amount	Shares	Shareholding %	Amount 6,513,504 1,575,778 2,656,135 159,758 1,112,641 75,270 3,674 37,790 19,312 470,627	Unitprice	Totalprice 6,513,504 1,575,778 2,656,135 159,758 1,112,641 75,270 3,674 37,790 19,312 470,627
Lotes Investment Limited Good Hope Investments Limited Guansi Development Co., Ltd. Zaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA. Inc. LOTES EU Gmbh Lerain Technology Co., Ltd. Mikronpoint Co., Ltd. Lotes Viet Nam Coi., Ltd	26,050,000 $ 5,201,468 401,281 1,531,999 20,016,426 2,239,442 500,000 121,209 69,000,000 1,044,195 2,500,000 75,816 100,000 4,059 938,525 2,687 500,000 4,936 - - $ 10,225,811		- 1,312,036 - 43,779 - 416,693 - 38,549 - 68,446 - - - - 3,793,534 35,103 2,000,000 14,376 17,985,000 470,627 2,399,609		- - - - - - - - - -	- - - - - 546 385 - - -	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 4,732,059 2,500,000 17,985,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 16.40% 100.00% 100.00%		- - - - - - - - - -		None “ “ “ “ “ “ “ “ “
		$ 10,225,811		2,399,609		931			12,624,489		12,624,489

Note: The amount includes the increase in investment amount of $570,421 thousand, the recognition of investment income of $1,905,258 thousand, the recognition of cumulative translation adjustment decrease of $82,102 thousand, the decrease in capital surplus of $5,460 thousand recognized under the equity method and the recognition of unrealized loss on financial assets of $359 thousand accounted for using the equity method.

134

Lotes Co., Ltd.

Statement of Deferred Tax Assets

Item Deferred tax assets	December 31, 2021 Summary	Unit: NT$ 1,000 Amount $ 66,302

Statement of Other Non-Current Assets

Item Refundable deposits Prepayment for construction work	Summary	Amount $ 6,027 3,322 $ 9,349

135

Lotes Co., Ltd.

Statement of Short-Term Borrowings

December 31, 2021

Unit: NT$ 1,000

Type Description Credit loan E.SUN Bank Credit loan CTBC Bank Credit loan Bank SinoPac Credit loan Hua Nan Bank Credit loan Mega Bank	$	Closing balance Period 152,240 2021.07.20~2022.07.20 - 2021.08.31~2022.08.31 - 2021.06.11~2022.06.30 400,000 2021.10.29~2022.10.29 - 2021.07.22~2022.07.21 552,240	Interest rate		Financing line Collateral or guarantee 300,000 Guaranteed notes of $300,000 thousand 300,000 Guaranteed notes of $300,000 thousand 366,080 Guaranteed notes of $366,080 thousand (Note 1) 600,000 Guaranteed notes of $600,000 thousand 193,760 Guaranteed notes of $193,760 thousand (Note 2) 1,759,840	Remark
			0.70% 0% 0% 0.85% 0%
	$

Note 1: The financing amount is NT$200,000 thousand and US$6,000 thousand. Note 2: The financing amount is US$7,000 thousand.

Statement of Notes Payable

Item	Summary	Amount $ 4,273 2,835 2,393 1,313 2,588 $ 13,402
Non-related parties: I company J company K company L company Other (Note)

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

136

Lotes Co., Ltd.

Statement of Accounts Payable

December 31, 2021

Unit: NT$ 1,000

Item	Summary	Amount $ 40,597 383,959 1,060,674 26,825 $ 1,512,055 $ 5,394 2,080 844 73 $ 8,391
Related parties: Lerain Technology Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Lintes Technology Co., Ltd. Non-related parties: M company N company O company Other (Note)

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

Statement of Other Payables

Item	Summary	Amount $ 2,166
Other payables - related parties Non-related parties: Salary payable Royalties payable Compensation payable to employees and directors and supervisors Technical service fees payable Freight and import/export expenses payable Other Total Income tax liabilities for the period	Mainly salary and year-end bonuses payable Mainly royalties payable Mainly compensation for employees and directors and supervisors in 2021 Mainly technical service fees payable Mainly freight and customs clearance fees for import and export of goods
		$ 28,307 26,689 126,542 19,661 20,488 71,753
		$ 293,440
		$ 350,031

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

137

Lotes Co., Ltd.

Statement of Refund Liabilities

						Unit: NT$ 1,000 Amount $ 195,105	Unit: NT$ 1,000 Amount $ 195,105
						Amount $ 7,441
						$
						Guarantee	Remark
First domestic unsecured convertible bond	Hua Nan Commercial Bank	2021.08.19 ~2024.08.1 9 0%	$ 1,000,000 (24,173)	(63,900)	911,927 Repayment of principal at maturity	None

138

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----- Start of picture text -----

Lotes Co., Ltd.
Statement of Deferred Income Tax
Liabilities
December 31, 2021 Unit: NT$ 1,000
Item Summary Amount
Deferred income tax liabilities $ 6,038
Statement of Provision for Liabilities -
Non-Current
Item Summary Amount
Provision for liabilities - Provision for employee benefit liabilities $ 45,220
non-current
Statement of Other Non-Current Liabilities
Item Summary Amount
Deposits received $ 744
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139

Lotes Co., Ltd.

Statement of Operating Revenue January 1 to December 31, 2021 Unit: NT$ 1,000

Item Sales revenue: General Triangular trade Less: Return of sales Discount on sales Net operating revenue	Quantity 934,978KPCS 1,696,925KPCS	Amount $ 8,209,994 6,150,206 (32,275) (176,715) $ 14,151,210

140

Lotes Co., Ltd.

Statement of Operating Cost

January 1 to December 31, 2021

Unit: NT$ 1,000

Item Direct raw materials Opening inventory Add: Incoming materials for the period Less: Raw materials at the end of the period Transfer to merchandise inventory sales Other Raw material consumption Manufacturing Costs Processing Costs Transfer of finished goods and merchandise Total manufacturing costs Add: Opening finished goods Less: Transfer to work-in-progress Finished goods at the end of the period Other Cost of finished goods Add: Opening goods Current period imports Transfer of raw materials to sales Other Less: Ending goods Other Cost of goods sold Loss on decline in value of inventories, slump and obsolescence Operating cost

Amount $ 23 341 (43) (40) (3) 278 4,558 254 2,985 8,075 191 (2,985) (3,379) (147) 1,755 755,770 11,672,705 40 19,098 (1,057,288) (2,264) 11,388,061 21,612 $ 11,411,428

141

Lotes Co., Ltd.

Statement of Promotion Expense January 1 to December 31, 2021 Unit: NT$ 1,000

Item	Summary	Amount $ 126,257 66,446 38,741 62,680 20,226 75,358 $ 389,708
Import and export expenses Payroll Freight fee Royalties Commission Other (Note) Total

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

Statement of Administration Expense

Item	Summary	Amount $ 174,416 19,271 115,290 $ 308,977
Salary expenses Labor expenses Other (Note) Total

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

142

Lotes Co., Ltd.

December 31, 2021

Please refer to the following notes for the remaining information on the schedule of significant accounting items:

(1) Statement of property, plant and equipment and changes in accumulated depreciation, Note VI (6).

(2) Statement of right-of-use assets and changes in accumulated depreciation, Note VI (7).

(3) Statement of investment property and accumulated depreciation, Note VI (8).

(4) Statement of changes in intangible assets, Note VI (9).

(5) Statement of the net amount of other revenues and gains and expenses and losses, Note VI (22)

143

5. 2021 Consolidated Financial Statements

Independent Auditor’s Report

To the Board of Directors of Lotes Co., Ltd.:

Audit opinion

We have audited the Consolidated Balance Sheet of Lotes Co., Ltd. and subsidiaries (Lotes Group) as of December 31, 2021 and 2020, the Consolidated Statement of Comprehensive Income as of January 1 to December 31, 2021 and 2020 as well as the Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and the Notes to Consolidated Financial Statement (including important accounting policies summary).

In our opinions, the compilation of the above consolidated financial statements present fairly, in all material respects, of the financial status of December 31, 2021 and 2020 in Lotes Group and the consolidated financial performance and consolidated cash flow of January 1 to December 31, 2021 and 2020 prepared according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission and issued into effect.

Basis of the audit opinions

The audit was conducted by us in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS). Our responsibilities under these standards will be further explained in the responsibility paragraph of the accountant’s audit on the consolidated financial statements. The personnel regulated by independence at the accounting firm that our accountants work with have been managed according to the code of professional ethics to maintain independence from Lotes Group as well as perform other responsibilities addressed on the regulation. Based on the audit results of us, we believe we have obtained sufficient and appropriate auditing evidence as the basis to express our audit opinions.

Key audit matters

Key audit matters refer to the most important matters on the audits to Lotes Group’s consolidated financial statements of fiscal year 2021 based on the professional judgment of our accountants. The matters have been responded on the whole audited consolidated financial statements and during the process of the expression of the audit opinions. There, our accountants will not express opinions separately towards the matters. Based on the judgment of the accountants, the following key audit matters that should be communicated on the audit report are as follows:

• I. Recognition of income

Please refer to Note IV (15) to the consolidated financial statements for the accounting policy in terms of income recognition. Please refer to Note VI (16) to the consolidated financial statements for the refund liability. Please refer to Note VI (24) to the consolidated financial statements for details about income. Description of the key audit matters:

The operating income is the most critical factor when determining the operational performance of Lotes Group. Users of the statements are cautiously concerned about the performance of the operating income. In response to the market conditions and business needs, discounts were provided for parts of the sales of goods agreed with the customers. Based on the agreements with the customers, the management would estimate the refund liability and include it as a deduction of operating income. Thus, the income recognition evaluation is one of the fundamental evaluation items for accountants in the execution of financial report audit for Lotes Group.

Corresponding audit procedures:

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the relevant control procedures and methods in the estimation of refund liabilities in terms of the sales procedure and the effectiveness of the design and execution of the control procedure. Regarding the sampling testing for sales close to the balance sheet date, external certification documents were reviewed to assess the adequacy of the income recognition timings. The management’s method to estimate and list refund liabilities were also obtained to assess whether the

144

evaluation is based on the agreed conditions with customers. The adequacy of the refund liability estimate was analyzed with the actual situation afterward.

II. Evaluation of inventory

Please refer to Note IV (8) for the accounting policy of inventory evaluation. Please refer to Note V in the consolidated financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note VI (4) in the consolidated financial statements for the information on the losses from the falling price of inventory. Description of the key audit matters:

Due to the impacts of rapid changes in the market demand and the development of production technology, the existing products are at risk to become outdated inventory or non-compliant with market demand. Parts of the inventory may become obsolete or have the market prices dropped. Thus, the inventory evaluation is one of the fundamental evaluation items for the accountants in the execution of financial report audit for Lotes Group.

Corresponding audit procedure:

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the basis and methods used by the management to assess the net realizable value of inventory. Review and audit were conducted in terms of the data used by the management as the basis and to estimate the net realizable value, and an evaluation was conducted on the estimated sales price to the latest sales record by sampling. To evaluate the adequacy of the drop in prices, the adequacy of the inventory aging report was checked, and the changes in the inventory aging of each period were analyzed.

Other Matters

Lotes Co., Ltd. has prepared its parent company only financial statements for fiscal years 2021 and 2020, and we have issued an unqualified audit report thereon for your information.

Responsibility from management level and governing unit towards the consolidated financial statements

Management level’s responsibility is to prepare the consolidated financial statements present fairly according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission and issued into effect and to maintain necessary internal control related to the preparation of the consolidated financial statements in order to ensure there is no major untrue expression on the financial statements due to fraud or error.

When preparing the consolidated financial statements, the responsibility of management level also includes evaluating Lotes Group’s capability of continuous operation, disclosure of relevant matters and the application of continuous operation accounting model unless the management level intends to liquidate Lotes Group or suspend its business operation or there is no alternative practical and feasible solution other than liquidation or business suspension.

The governing unit (including the audit committee) at Lotes Group is responsible for supervising the process of financial reports.

Responsibility of accountants’ audit on the consolidated financial statements

The purpose of the consolidated financial statements audited by our accountants is to obtain reasonable assurance on whether the significant untrue expression exists on the whole consolidated financial statements due to fraud or error as well as issue the audit report. The reasonable assurance is the high certainty; however, it will not be able to guarantee that the significant untrue expression will definitely be able to be detected by generally accepted auditing standards, and the untrue expression might be caused from fraud or error. It is regarded as with significance if the individual amount or the aggregation number of the untrue expression can reasonably predict that it will affect the economic decisions made by the users of the consolidated financial statements.

When we conduct the audit according to generally accepted auditing standards, we use professional judgment and maintain our professional suspicion. We also executed the following tasks:

1. Identifying and evaluating the risk of major untrue expression on the consolidated financial statements due to fraud or error; designing and implementing proper responding strategies towards the risk evaluated; and obtaining sufficient and appropriate audit evidence as the basis of audit opinions. Due to fraud might be involving with collusion, counterfeiting, malicious omission untrue declaration, or going out of the internal control, the risk of not detecting the major untrue expression due to fraud will be higher than that due to error.

2. Obtaining necessary understanding of internal control related to audit in order to design proper audit procedure under the situation of the case. However, its purpose is not to express opinion toward the

145

effectiveness of the internal control in Lotes Group.

1. Evaluating the adequacy of the accounting policies used by the management level and the rationality of the accounting evaluation and relevant disclosure concluded.

2. Based on the audit evidence obtained, conclusion towards the appropriateness of continuous operation accounting basis that the management level adopts and the existence of major uncertainty on events or situations with major concerns affecting Lotes Group’s capability in continuous operation are made. If we believe major uncertainty existed on the event or situation, we must remind the users of consolidated financial statements on the audit report to pay attention on the relevant disclosure or modify audit opinion when the disclosure is not appropriate. The conclusion that we made is based on the audit evidence obtained up to the audit report day, but future events or situations might cause Lotes Group not capable in continuous operation.

3. Evaluating the overall expression, structure and content of the consolidated financial statements (including relevant notes) as well as whether the consolidated financial statements present fairly, in all material respects, relevant transaction and events.

4. We obtained sufficient and appropriate audit evidence about the financial information of the constituent entities of the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and execution of the Group's audits and for forming an opinion on the Group's audits.

The communication between us and the governing unit includes the audit scope and time planned and major audit findings (including the significant defects on the internal control identified during the auditing process).

We have also provided information to the governing unit that the personnel of the firm—under which our CPAs are working—who are subject to independence requirements have complied with the statement of independence in the CPA code of professional ethics and communicated to the governing unit all relationships and other matters (including relevant safeguards) that may be considered to affect the independence of CPAs.

We determined the key audit matters that we would like to execute on Lotes Group’s consolidated financial statements for fiscal year 2021 from the communication with the governing unit. We clearly stated the related matters on the audit report unless it is the specific matter that is not allowed to be disclosed to the public according to laws, or under a very rare situation that we decided not to communicate specific matters on the audit report because we can reasonably anticipate the negative influence generated by the communication will be greater than the public interests increased.

KPMG Taiwan

CPAs:

Competent Authority of Securities CHIN-KUAN-CHENG-SHEN-TZ Approval Certificate No. : U No. 1000011652 (88) TAI-TSAI-CHENG (VI) No. 18311 March 21, 2022

146

Lotes Co., Ltd. And Subsidiaries

Consolidated Balance Sheet December 31, 2021 and 2020

Unit: NT$ 1,000

Assets Current assets: 1100 Cash and cash equivalents(Note VI (1) and (27)) 1110 Financial assets measured at FVTPL - current (Note VI (2) and (27)) 1120 Financial assets measured at FVTOCI - current (Note VI (2) and (27)) 1150 Net notes receivable(Note VI (3) and (27)) 1170 Net accounts receivable(Note VI (3) and (27)) 1200 Other receivables(Note VI (3) and (27)) 1220 Income tax assets for the period(Note VI (20)) 130X Net inventory(Note VI (4)) 1410 Advance payment 1476 Other financial assets - current (Note VI (11) and (27)) 1479 Other current assets - other Non-current assets: 1510 Financial assets measured at FVTPL - non-current (Note VI (2) and (27)) 1517 Financial assets measured at FVTOCI - non-current (Note VI (2) and (27)) 1600 Property, plant and equipment(Note VI (7) and 8) 1755 Right-of-use assets(Note VI (8)) 1760 Net investment property(Note VI (9)) 1780 Intangible assets(Note VI (10)) 1840 Deferred tax assets(Note VI (20)) 1900 Other non-current assets Total of assets	Dec. 31, 2021		Dec. 31, 2020 Amount % 2,949,412 15 122,960 1 2,016 - 54,105 - 6,840,879 35 357,029 2 12,937 - 2,559,028 13 62,208 1 87,320 1 6,665 - 13,054,559 68 - - 20,120 - 4,495,974 23 399,749 2 368,019 2 155,510 1 127,144 1 661,820 3 6,228,336 32 19,282,895 100 2100 Short-term loans (Note VI (12), (27), (30) VIII and IX) 2130 Contract liabilities - current (Note VI (24)) 2150 Notes payable(Note VI (27)) 2170 Accounts payable(Note VI (27)) 2200 Other payables(Note VI (27)) 2230 Income tax liabilities for the period - current (Note VI (20)) 2280 Lease liabilities - current(Note VI (15), (27) and (30)) 2365 Refund liabilities - current (Note VI (16)) 2300 Other current liabilities 2322 Long-term loans – current portion(Note VI (13), (27), (30), and VIII) Non-current liabilities: 2530 Bonds payable(Note VI (14), (27) and (30)) 2540 Long-term loans(Note VI (13), (27), (30) and VIII) 2550 Provisions – non-current (Note VI (17)) 2560 Income tax liabilities for the period - non-current (Note VI (20)) 2570 Deferred income tax liabilities (Note VI (20)) 2580 Lease liabilities - non-current(Note VI (15), (27) and (30)) 2600 Other non-current liabilities Total of liabilities Equity attributable to owners of parent: Share capital: 3110 Capital – common stock (Note VI (21)) 3130 Certificates of bond-to-stock conversion (Note VI (21)) 3200 Capital reserves(Note VI (21)) 3300 Retained earnings(Note VI (21)) 3400 Other equity (Note VI (21)) Total equity attributable to owners of parent 36XX Non-controlling interest (Note VI (6)) Total of equity Total of liabilities and equity	$ 1,142,178 4 - - 97,494 - 91,659 1 16,402 - 3,574 - 2,613,359 10 2,501,155 13 1,998,938 8 1,206,695 6 670,568 3 505,527 3 220,742 1 71,971 - 195,105 1 161,767 1 34,715 - 33,197 - 14,805 - 5,335 -
				7,004,306 27 4,580,880 24
				911,927 4 - - 29,600 - 18,661 - 45,220 - 49,258 - 31,342 - 21,037 - 33,906 - 27,054 - 285,847 1 104,279 1 22,539 - 2,167 -
	16,959,937 64
	3,370 - 30,003 - 6,882,186 26 1,028,489 4 335,869 1 205,584 1 151,467 1 822,486 3
				1,360,381 5 222,456 1
				8,364,687 32 4,803,336 25
				1,059,779 4 1,034,779 5 1,167 - - - 5,283,698 20 3,958,247 21 11,200,170 42 9,101,144 (682,333) (3) (594,972) (3)
	9,459,454 36
				16,862,481 63 13,499,198 70
				1,192,223 5 980,361 5
				18,054,704 68 14,479,559 75
				$ 26,419,391 100 19,282,895 100
	$ 26,419,391 100

Liabilities and equity Current liabilities:

Dec. 31, 2021 Dec. 31, 2020 Amount % Amount %

147

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Comprehensive Income

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

4000 Operating revenue(Note VI (16), (24) and XIV) 5000 Operating cost(Note VI (4), (10) and XII) Gross profit Operating expense(Note VI (10), (15), (18), (26), VII and XII): 6100 Promotion expense 6200 Administration expense 6300 R&D expense 6450 Expected credit loss (gain) Total operating expense Net operating profit Non-operating revenue/expense(Note VI (5) and (25)): 7100 Interest income 7140 Gain recognized in bargain purchase transaction 7010 Other income 7020 Other gains and losses 7050 Financial costs 7055 Expected credit gain (loss) Total non-operating revenue/expense Net profit before tax from continuing operations 7950 Less: Income tax expense(Note VI (20)) Net profit for the period 8300 Other comprehensive income: 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurements of defined benefit plan 8316 Unrealized gains (losses) from investments in equity instruments measured at FVTOCI 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Total components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation 8399 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss Total components of other comprehensive income that will not be reclassified to profit or loss 8300 Other comprehensive income for the period (net) Total other comprehensive income for the period Net profit for the period attributable to: 8610 Owners of parent 8620 Non-controlling interest Total comprehensive income attributable to: 8710 Owners of parent 8720 Non-controlling interest Basic earnings per share (Unit: NT$) (Note VI (23)) Diluted earnings per share (Unit: NT$) (Note VI (23))	2021	% 100 60	2020	% 100 60
	Amount $ 21,391,917 12,834,611		Amount 17,291,332 10,361,137
	8,557,306	40	6,930,195	40
	748,932 1,409,600 2,030,576 8,931	4 7 9 -	642,420 1,117,631 1,459,647 2,845	4 6 8 -
	4,198,039	20	3,222,543	18
	4,359,267	20	3,707,652	22
	13,994 - 324,926 (128,648) (28,304) (1,037)	- - 2 (1) - -	28,789 13,055 214,267 (276,469) (18,609) 1,317	- - 1 (2) - -
	180,931	1	(37,650)	(1)
	4,540,198 1,021,167	21 5	3,670,002 834,413	21 5
	3,519,031	16	2,835,589	16
	3,851 (5,077) 770	- - -	(7,598) 372 (1,520)	- - -
	(1,996)	-	(5,706)	-
	(82,222) (39)	- -	46,886 (1,733)	- -
	(82,183)	-	48,619	-
	(84,179)	-	42,913	-
	$ 3,434,852	16	2,878,502	16
	$ 3,472,201 46,830	16 -	2,732,361 103,228	15 1
	$ 3,519,031	16	2,835,589	16
	$ 3,387,921 46,931	16 -	2,771,703 106,799	16 -
	$ 3,434,852	16	2,878,502	16
	$	33.32		26.41
	$	32.69		26.34

(Please read the Notes to the Parent Company Only Financial Statements) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU

Accounting Manager: LIU, HSIN-HSIA

148

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Changes in Equity

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

Balance on January 1, 2020 Net profit for the period Other comprehensive income for the period Total other comprehensive income for the period Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of common stock Other changes in capital reserves: Changes in equity of subsidiaries, associates and joint ventures accounted for using equity method Changes in non-controlling interests Cash dividends paid by subsidiaries to non-controlling interests Disposal of equity instruments measured at FVTOCI Balance on December 31, 2020 Net profit for the period Other comprehensive income for the period Total other comprehensive income for the period Appropriation and distribution of retained earnings: Legal reserve appropriated Reversal on special reserve Cash dividends of common stock Other changes in capital reserves: Issuance of stock options for convertible bonds Changes in equity of subsidiaries, associates and joint ventures accounted for using equity method Compensation expense for employee stock options Cash capital increase Conversion of convertible bonds Changes in non-controlling interests Cash dividends paid by subsidiaries to non-controlling interests Balance on December 31, 2021				Equity attributable to owners ofparent	Equity attributable to owners ofparent	Equity attributable to owners ofparent	Equity attributable to owners ofparent				Non-controlling interests	Total equity 12,545,22 2,835,58 42,91
		Share capital		Capital reserves		**Retained earnings **		Other equity		Total equity attributable to owners of parent
								Exchange differences on translation of foreign financial statements	Unrealized gains (losses) on financial assets measured at FVTOCI
	Share capital for ordinary shares	Certificates of bond-to-stock conversion	Total		Legal reserve	Special reserve	Unappropriated retained **earnings **
	$ 1,034,779 - -	- - -	1,034,779 - -	3,959,560 - -	1,091,939 - -	317,020 - -	6,062,560 2,732,361 (6,078)	(631,970) (18,562) - - 45,017 403		11,815,326 2,732,361 39,342	729,899 103,228 3,571 106,799 - - - - 192,780 (49,117) - 980,361 46,830 101 46,931 - - - - - - - - 237,061 (72,130) 1,192,223
	-	-	-	-	-	-	2,726,283	45,017 403		2,771,703		2,878,50
	- - - - - - -	- - - - - - -	- - - - - - -	- - - (1,313) - - -	207,604 - - - - - -	- 333,513 - - - - -	(207,604) (333,513) (1,086,518) - - - (10,140)	- - - - - - - - - - - - - 10,140		- - (1,086,518) (1,313) - - -		- - (1,086,518 (1,313 192,78 (49,117 -
	1,034,779 - -	- - -	1,034,779 - -	3,958,247 - -	1,299,543 - -	650,533 - -	7,151,068 3,472,201 3,081	(586,953) (8,019) - - (82,102) (5,259)		13,499,198 3,472,201 (84,280)		14,479,55 3,519,03 (84,179
	-	-	-	-	-	-	3,475,282	(82,102) (5,259)		3,387,921		3,434,85
	- - - - - - 25,000 - - -	- - - - - - - 1,167 - -	- - - - - - 25,000 1,167 - -	- - - 183,236 5,460 24,931 1,050,971 60,853 - -	271,615 - - - - - - - - -	- (55,561) - - - - - - - -	(271,615) 55,561 (1,376,256) - - - - - - -	- - - - - - - - - - - - - - - - - - - -		- - (1,376,256) 183,236 5,460 24,931 1,075,971 62,020 - -		- - (1,376,256 183,23 5,46 24,93 1,075,97 62,02 237,06 (72,130
	$ 1,059,779	1,167	1,060,946	5,283,698	1,571,158	594,972	9,034,040	(669,055) (13,278)		16,862,481		18,054,70

(Please read the Notes to the Parent Company Only Financial Statements) Manager: HO, TE-YU

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

149

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Cash Flows

From January 1 to December 31, 2021 and 2020

Cash flows from (used in) operating activities: Net profit before tax Adjustments: Adjustments to reconcile profit (loss) Depreciation expense Amortization expense Expected credit loss (gain) Net loss (gain) on financial assets or liabilities at FVTPL Interest expense Interest income Dividend income Compensation expense for share-based payment Loss (gain) on disposal of property, plant and equipment Inventory valuation and disposal loss Gain recognized in bargain purchase transaction Other adjustments Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Increase in notes receivable Increase in accounts receivable Increase in other receivables Increase in inventory Increase in advance payment Decrease (increase) in other current assets Decrease in other financial assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in contract liabilities Decrease in notes payable Increase in accounts payable Increase in other payables Decrease in provisions Decrease in other current liabilities Increase in Refund liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities : Disposal of financial assets measured at FVTOCI Acquisition of financial assets measured at FVTOCI Acquisition of financial assets measured at FVTPL Disposal of financial assets measured at FVTPL Acquisition of property, plant and equipment Disposal of property, plant and equipment Acquisition of intangible assets Net cash inflows from business combination Acquisition of investment property Disposal of investment property Increase in other non-current assets Net cash flows from (used in) investing activities Cash flows from (used in) financing activities Increase (decrease) in short-term loans Issuance of corporate bonds Borrowings of long-term loans Repayments of long-term loans Payments of lease liabilities Increase in other non-current liabilities Cash dividends paid Cash dividends paid to non-controlling interests Cash capital increase Changes in non-controlling interests Changes in subsidiaries, associates and joint ventures accounted for using equity method Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	Unit: NT$ 1,000 2021 2020 $ 4,540,198 3,670,002 1,503,974 1,115,332 51,307 26,245 9,968 1,528 (25,795) (55,053) 28,304 18,609 (13,994) (28,789) (6,119) (1,341) 25,077 7,795 3,728 (2,446) 92,408 48,028 - (13,055) (2,472) 19	Unit: NT$ 1,000 2021 2020 $ 4,540,198 3,670,002 1,503,974 1,115,332 51,307 26,245 9,968 1,528 (25,795) (55,053) 28,304 18,609 (13,994) (28,789) (6,119) (1,341) 25,077 7,795 3,728 (2,446) 92,408 48,028 - (13,055) (2,472) 19
	1,666,386	1,116,872
	(7,187) (1,904,786) (107,813) (1,624,767) (81,083) (2,353) 87,320	(30,249) (788,350) (133,684) (486,885) 87,437 3,898 4,960
	(3,640,669)	(1,342,873)
	5,835 12,828 112,204 809,880 (187) 1,518 33,338	37,431 (23,091) 539,618 203,974 (69) 9,860 4,511
	975,416	772,234
	(2,665,253)	(570,639)
	(998,867)	546,233
	3,541,331 18,588 6,119 (24,622) (851,646)	4,216,235 26,790 1,341 (18,616) (756,926)
	2,689,770	3,468,824
	- (14,400) (174,504) 166,435 (3,631,931) 18,589 (101,381) (96,793) - 30,446 (284,138)	4,860 (20,186) (125,418) 297,545 (1,774,297) 38,123 (80,912) (59,647) (17,923) - (310,189)
	(4,087,677)	(2,048,044)
	1,142,178 1,152,983 29,600 (9,191) (356,459) 4,669 (1,376,256) (72,130) 1,075,971 236,940 5,435	(66,660) - 20,035 (125,583) (114,174) (75,956) (1,086,518) (49,117) - 137,365 (5,377)
	1,833,740	(1,365,985)
	(82,183) 353,650 2,949,412	48,623 103,418 2,845,994
	$ 3,303,062	2,949,412

(Please read the Notes to the Parent Company Only Financial Statements) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU

Accounting Manager: LIU, HSIN-HSIA

150

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Lotes Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements 2021 & 2020 (All amounts are in NT$ thousands unless otherwise stated)

I. Company History

Lotes Co., Ltd. (hereinafter referred to as the “Company”) was incorporated on August 23, 1986 in accordance with the provisions of the Company Act and was approved for registration with its registered office at No.15, Wuxun Street, Anle District, Keelung City. The Company and Subsidiaries (hereinafter referred to as the “Consolidated Company”) are principally engaged in the sale and purchase of various hardware parts and components, the manufacturing and processing of various terminals and their connectors, the import and export business in connection with the preceding item and the agency of the preceding item in connection with the tender quotation and distribution of products of domestic and foreign manufacturers. Please refer to Note XIV for further details.

II. Date and Procedures of Approval of Financial Statement

The Consolidated Financial Statement was approved and released by the Board of Directors on March 21, 2022.

III. Application of New and Revised Standards and Interpretations

(1) Influence of the Adoption of New and Revised Standards and Integrations Approved by the Financial Supervisory Commission

Since January 1, 2021, the Consolidated Company has adopted the amended International Financial Report Standards, and this did not cause material impact on the consolidated financial statements: ‧Amendments to IFRS 4 “Temporary Exemption from the Extension of IFRS 9” ‧Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, “Changes in Interest Rate Indicators - Phase 2” The Consolidated Company adopted the following newly amended IFRSs effective April 1, 2021, with no significant impact on consolidated financial statements. ‧Amendment to IFRS 16 – “Covid-19-Related Rent Concessions beyond 30 June 2021” (2) Effects of new and revised standards and interpretation has been approved by FSC but not yet being adopted The Consolidated Company assesses that the application of the following newly amended IFRSs, effective January 1, 2022, will not have a significant impact on consolidated financial statements.

‧Amendments to IAS 16 – “Property, Plant and Equipment: Proceeds before Intended Use” ‧Amendments to IAS 37 – “Onerous Contracts—Cost of Fulfilling a Contract” ‧Annual Improvements to IFRS Standards 2018–2020 ‧Amendments to IFRS 3 – “Reference to the Conceptual Framework” (3) New and revised standards and interpretations not yet recognized by the FSC The Consolidated Company does not expect the following newly issued and amended standards, which have not yet been endorsed, to have a material impact on the consolidated financial statements.

‧Amendments to IFRS 10 and IAS 28, “Disposal of or Contribution to Assets between an Investor and its Affiliate or Joint Venture”. ‧Amendments to IFRS 17, “Insurance Contracts” and IFRS 17

‧Amendments to IAS 1 – “Classification of Liabilities as Current or Non-Current”

‧Amendments to IAS 1 – “Disclosure of Accounting Policies”

‧Amendments to IAS 8 – “Definition of Accounting Estimates”

‧Amendments to IAS 12 – “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

IV. Summary of Major Accounting Policies

The major accounting policies adopted in this Financial Statement are summarized as follows. Unless otherwise noted, the following accounting policies have been applicable for all presentation period of the Consolidated Financial Statement.

151

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(1) Compliance statement

The Consolidated Financial Statement was compiled in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission.

• (2) Compiling basis

• Measurement foundation

Except the major items in the following balance sheet, the Consolidated Financial Statement was compiled based on the historical costs:

• (1) Financial assets at fair value through profit or loss measured with fair value.

• (2) Financial assets measured at fair value through other comprehensive income. (3) Liabilities for cash-settled share-based benefit agreements that are measured at fair value.

• (4) Net defined benefit liability (or asset) is measured according to the fair value of the retirement fund assets deducting present value of the defined benefit obligation and the ceiling influence value listed in Footnotes IV (16).

• Functional currency and presentation currency

Each party of the Consolidated Company takes the currency of major economic environment where each operation is located as its functional currency. The Consolidated Financial Statement is presented in the functional currency of the Company, NTD. All of the financial information expressed herein in NTD is of one thousand per unit.

(3) Consolidation basis

The main entity for the preparation of consolidated financial statements consists of the Company and the entity controlled by the Company (i.e., the subsidiaries).

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control is obtained until the date that control is lost. Gains or losses attributable to the subsidiary's non-controlling interest are attributed to the non-controlling interest, even if the non-controlling interest becomes a loss balance as a result.

Inter-company transactions, balances and any unrealized gains and losses are eliminated in the preparation of the consolidated financial statements.

Changes in ownership interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions with owners.

1. Subsidiaries included in the consolidated financial statements

The subsidiaries included in the consolidated financial statements are:

Investing company Subsidiary **Location **

Shareholding % Dec. 31, 2021 Dec. 31, 2020 Note

The Company Lotes Investments Limited Samoa 〞 Good Hope Investments Limited 〞 〞 Guansi Development Co., Ltd. 〞 〞 Zhaxi Investment Co., Ltd. Anguilla 〞 Jiayu Investment Co., Ltd. Taiwan 〞 Lotes USA, Inc America 〞 LOTES EU GmbH Germany 〞 Lerain Technology Co., Ltd. Taiwan 〞 Mikronpoint Co., Ltd. 〞 〞 Lotes Viet Nam CO., Ltd. Vietnam Lotes Investments Limited Loteson International Investments Limited Hong Kong Loteson Lotes Guangzhou Co., Ltd. China

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 16.40% 33.92% (Note 1) 100.00% 100.00% 100.00% - % 100.00% 100.00% 100.00% 100.00%

152

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

International
Investments
Limited
Lotes	Lotes Hengnan Co., Ltd.	〞	100.00%	100.00%
Guangzhou
Co., Ltd.
〞	Shenzhen DeYi Automation	〞	100.00%	100.00%
	Equipment Co., Ltd.
〞	Lotes Zhongshan Co., Ltd.	〞	50.00%	50.00%
〞	Zhongshan Dezhi Metal Surface	〞	100.00%	100.00%
	Treatment Co., Ltd.
〞	Hengnan Deyi Property	〞	100.00%	100.00%
	Development Co., Ltd.
〞	Zhongshan Jinmeida Metal	〞	- %	- %	(Note 1)
	Surface Treatment Co., Ltd.				and
					(Note 2)
〞	Guangzhou Leside Technology	〞	100.00%	100.00%
	Co., Ltd.
Guangzhou	Chongqing Fuxinrui Electronic	〞	51.00%	51.00%
Leside	Technology Co., Ltd.
Technology
Co., Ltd.
Good Hope	Xincheng Development Co.,	Samoa	100.00%	100.00%
Investments	Ltd.
Limited
〞	REKA Technology Co., Ltd.	Hong Kong	100.00%	100.00%
Guansi	Jae You Co., Ltd.	〞	100.00%	100.00%
Development
Co., Ltd.
Jae You Co.,	Lotes Suzhou Co., Ltd.	China	100.00%	100.00%
Ltd.
Lotes Suzhou	Lotes Zhongshan Co., Ltd.	〞	50.00%	50.00%
Co., Ltd.
Zhaxi	Wangden Investments Limited	Hong Kong	100.00%	100.00%
Investment
Co., Ltd.
Wangden	Zongka Technology (Shenzhen)	China	100.00%	100.00%
Investments	Co., Ltd.
Limited
Jiayu	Ememe Robot Co., Ltd.	Taiwan	94.37%	94.37%
Investment
Co., Ltd.
〞	Compertum Microsystems Inc.	〞	31.25%	35.34%	(Note 1)
〞	Good News Medical Co., Ltd.	〞	25.44%	5.00%	(Note 1)
〞	Lintes Technology Co., Ltd.	〞	52.13%	52.13%
Lintes	Jiajun Investment Co., Ltd.	〞	- %	100.00%	(Note 3)
Technology
Co., Ltd.

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Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

〞	Genie Precision Machine Co.,	〞	60.00%	60.00% (Note 2)
	Ltd.
〞	Compertum Microsystems Inc.	〞	10.41%	11.77% (Note 1)
〞	Lerain Technology Co., Ltd.	〞	1.90%	- % (Note 1)
〞	Jilong Co., Ltd.	Samoa	100.00%	100.00%
Jilong Co.,	Rihui Co., Ltd.	〞	100.00%	100.00%
Ltd.
Rihui Co.,	Lintes Technology (Suzhou)	China	100.00%	100.00%
Ltd.	Co., Ltd.

• Note 1: Although the Consolidated Company does not hold more than half of the voting shares of this company, it is included as a subsidiary in the consolidated financial statements because the Consolidated Company has control over its major operating activities and other decisions.

• Note 2: Please refer to Note VI (5) for the Consolidated Company's acquisition of control over this company.

• Note 3: Liquidation eliminated in the fourth quarter of 2021.

• Subsidiaries not included in the consolidated financial statements: None.

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Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(4) Foreign currency

1. Foreign currency trading

Foreign currency is converted into functional currency according to exchange rate on the date of transaction. At the end of each subsequent reporting period (the “Reporting Date”), foreign currency monetary items are translated into functional currency at the exchange rate prevailing on that date. Non-monetary items measured at fair value in foreign currencies are translated into functional currencies using the exchange rates prevailing at the date of fair value measurement, while non-monetary items measured at historical cost in foreign currencies are translated at the exchange rates prevailing at the dates of the transactions.

The foreign currency exchange difference resulting from the conversion is recognized to be other comprehensive Income excepting for the following situations, otherwise, recognized to be gains and losses:

(1) Equity instruments designated as measured at fair value through other comprehensive income.

(2) Financial liabilities designated as a net investment hedge for a foreign operating entity are within the effective range of the hedge; or

(3) Eligible cash flow hedges are within the effective range of the hedge.

1. Foreign operating organizations

The assets and liabilities of foreign operating organizations, including the business reputation and fair value adjustment during the acquisition, are converted to be NTD according to exchange rate on the report day; gains and losses are converted into NTD according to exchange rate in the current period, and the resultant conversion difference is recognized to be other comprehensive Income.

In case of the loss of control, joint control or material influences arising from the punishment on foreign operating organizations, the accumulated conversion differences related to the foreign operating organizations shall be fully reclassified as gains and losses. Upon partial disposal of a subsidiary with foreign operations, the related accumulated exchange differences are reattributed to non-controlling interest on a pro rata basis. In case of affiliated company or joint ventures of foreign operating organizations involved in some of the punishment, related accumulated conversion differences shall be fully reclassified as gains and losses in proportion.

As to the receivable and payable monetary items of foreign operating organizations, if without the repayment plan or the possibility of repayment in foreseeable future, the resultant gains and losses from foreign currency conversion shall be regarded as a part of net investments to the foreign operating organizations as recognized as other comprehensive income.

• (5) Standards for classifying current and non-current assets and liabilities

Assets meeting one of the following conditions are recognized to be current assets, and other assets not belonging to current assets are recognized to be non-current assets:

1. Those that are expected to be realized during the normal operating period or intended to be sold or consumed.

2. Those held mainly for the purpose of transaction.

3. Those expected to be realized within 12 months after the reporting period.

4. The asset is cash or cash equivalents, unless the asset is otherwise restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

5. The liabilities meeting any one of the following conditions are current liabilities, and

6. other liabilities not belonging to current liabilities are recognized to be non-current liabilities:

7. Those expected to be paid off during the normal operating period.

8. Those held mainly for the purpose of transaction.

9. Those expected to be paid off within 12 months after the reporting period. 4. Liabilities that do not have an unconditional right to extend the maturity period to at least 12 months after the reporting period. The terms of the liability may, at the option of the counterparty, not affect its classification if the issuance of equity instruments results in its settlement.

10. (6) Cash and cash equivalents

Cash includes cash on hand and demand deposits. Cash equivalents are the investments which are allowed to be converted into normed cash with few value change risks and short-term high flowability. Certificate of deposit which satisfy the foregoing definition and

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Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

with the holding purpose of meeting the short-term cash pledges rather than investment or others shall be recognized as cash equivalents. (7) Financial instrument

Accounts receivable and the original debt securities issued are recognized when they are incurred. All other financial assets and financial liabilities were originally recognized when the Consolidated Company became a party to the terms of the financial instrument agreement. Financial assets that are not measured at fair value through profit or loss (except accounts receivable, which do not contain a significant financial component) or financial liabilities are measured at fair value plus the transaction cost directly attributable to the acquisition or issue. Accounts receivable, which do not contain significant financial components, are originally measured at transaction prices. 1. Financial assets

The purchase or sale of financial assets by a conventional trader, the Consolidated Company shall treat all purchases and sales of financial assets classified in the same manner in accordance with the transaction date or the settlement date.

At the time of the original recognition, financial assets were classified as: financial assets measured at amortized cost, debt instrument investments measured at fair value through other comprehensive income, equity instrument investments measured at fair value through other comprehensive income, or financial assets measured at fair value through gains and losses.

The Consolidated Company will only change its business model for managing financial assets from the first day of the next reporting period to classify all affected financial assets.

(1) Financial assets measured at amortized cost

Financial assets are measured at post-amortized cost when they simultaneously meet the following conditions and are not specified to be measured at fair value through profit or loss:

‧The financial asset is held under a business model for the purpose of collecting contractual cash flow.

‧The cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

The cumulative amortization of such assets is subsequently calculated by the effective interest method plus or minus the original amount recognized, and the amortized cost of any loss allowance is adjusted. Interest income, foreign exchange gains and losses and impairment losses are recognized as gains and losses. When derecognized, the profit or loss shall be included in the profit or loss.

(2)Financial assets measured at FVTOCI

When the debt instrument investment simultaneously meets the following conditions and is not specified to be measured at fair value through profit and loss, it is measured at fair value through other consolidated profit and loss:

‧The financial asset is held under a business model for the purpose of collecting contractual cash flow and selling.

‧The cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

The Consolidated Company may, at the time of its original recognition, irrevocably choose to report the subsequent changes in the fair value of its non-tradable equity instrument investments to other consolidated profits and losses. The foregoing selection is made on an item-by-item tool basis.

Debt instrument investors are measured by fair value afterwards. Interest income, foreign exchange gains and losses and impairment losses calculated by the effective interest method are recognized as gains and losses, while the remaining net gains or losses are recognized as other comprehensive income. When discounting, the accumulated amount of other comprehensive income shall be reclassified into comprehensive income.

Equity instrument investors are measured by fair value afterwards. Dividend income (unless it clearly represents the recovery of a portion of the investment cost) is recognized as a profit or loss. The remaining net benefits or losses are recognized as other comprehensive income and are not reclassified into gains and losses.

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Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Dividend income from equity investments is recognized on the date (usually ex-dividend date) when the Consolidated Company becomes entitled to receive dividends.

(3) Financial assets measured at FVTPL

Financial assets that are not measured at fair value at the above amortized cost or through other comprehensive income are measured at fair value through gains and losses, including derivative financial assets. The Consolidated Company may, at the time of its original recognition, irrevocably designate financial assets that meet the criteria of measuring at fair value according to the amortized cost or through other comprehensive income as financial assets measured at fair value through gains and losses in order to eliminate or substantially reduce improper accounting matching.

Such assets are subsequently measured at fair value and their net gains or losses (including any dividends and interest income) are recognized as gains or losses.

(4) Business model evaluation

The purpose of the Consolidated Company is to assess the business model of holding financial assets at a portfolio level, which best reflects the way of operation and management and the way of providing information to management. The following information is considered:

·The portfolio policies and objectives described and the operation of such policies. Including whether the management’s strategy is to focus on earning contractual cash flow, maintaining a certain portfolio of interest rates, matching the duration of financial assets with the duration of the relevant liabilities or anticipated cash outflows, or achieving cash flow through the sale of financial assets.

·Performance of the business model and how the financial assets held under the business model are evaluated and reported to the principal managers of the business.

·Risks that affect the performance of the business model (and the financial assets held under the business model) and the manner in which such risks are managed.

·The frequency, amount and timeliness of previous sales of financial assets, the reasons for such sales and the expectation of future sales.

The transfer of a financial asset to a third party for the above business purposes that does not meet the exclusion criteria is not a sale as described above, consistent with the purpose for which the merged Consolidated Company continues to recognize the asset. Financial assets held for trading and managed and evaluated for performance on a fair value basis are measured at fair value through profit and loss.

• (5) Evaluate whether the cash flow of the contract is fully the interest on the payment of the principal and the amount of outstanding principal

For evaluation purposes, the principal is the fair value of the financial asset at the time of its original recognition, and the interest is made up of the following considerations: the time value of money, the credit risk associated with the amount of outstanding principal in circulation during a particular period, and other basic lending risks and costs and profit margins.

To evaluate whether the contract cash flow is fully interest on the principal and the outstanding principal amount, the Consolidated Company considers the terms of the financial instrument contract, including whether the financial asset contains a contract term that can change the point or amount of the cash flow of the contract, causing it to fail to meet this condition. In the evaluation, the Consolidated Company considers:

·Any contingencies that change the timeliness or amount of the cash flow of the contract;

·The terms of the coupon rate may be adjusted, including the nature of the variable rate;

·The nature of prepayment and extension; and

·Claims of the Consolidated Company are limited to cash flow terms derived from specific assets (e.g. non-recourse nature).

• (6) Impairment of financial assets

For the financial assets measured at the amortized cost after (including cash and about when cash, notes receivable, accounts receivable, other receivables, refundable deposit, and other financial assets, etc.), through the other comprehensive income measured at fair value, the debt instruments of investment assets and contract of expected loss, the Consolidated Company recognizes the allowance for credit losses. The following financial assets are measured against losses according to the expected credit loss amount of 12 months, and the rest are measured according to the

157

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

expected credit loss amount of the existing period:

‧Determine that the credit risk of the debt securities at the reporting date is low; and ‧The credit risk of other debt securities and bank deposits (i.e. the risk of default during the expected life of financial instruments) has not increased significantly since the original recognition.

The loss allowance for accounts receivable and contract assets is measured in terms of the expected credit loss during the period of existence.

In determining whether credit risk has increased significantly since the initial recognition, the Consolidated Company considers reasonable and verifiable information (available at no excessive cost or investment), including qualitative and quantitative information, as well as analysis based on the Consolidated Company’s historical experiences, credit assessment and forward-looking information.

The Consolidated Company shall be deemed to be in default of the financial asset if the debtor of the contract payment is unlikely to meet his credit obligations to make the full payment to the Consolidated Company.

Expected credit loss during the life of a financial instrument refers to the expected credit loss arising from all possible defaults during the life of the financial instrument.

Twelve-month expected credit loss refers to the expected credit loss arising from the possible default of the financial instrument within twelve months after the date of the report (or a shorter period, if the expected duration of the financial instrument is shorter than twelve months).

The longest contract period during which the expected credit loss is measured is the longest contract period during which the Consolidated Company is exposed to credit risk.

The expected credit loss is the probabilistic weighted estimate of the credit loss during the expected life of the financial instrument. Credit losses are measured in terms of the present value of all cash shortfalls, the difference between the cash flows that the Consolidated Company can collect under the contract and the cash flows that the Consolidated Company expects to collect. The expected credit loss is discounted at the effective interest rate of the financial asset.

On each reporting date, the Consolidated Company evaluates whether there is a credit impairment in the debt securities on which financial assets are measured at after-amortized cost and on which fair value is measured through other comprehensive income. When one or more events have occurred that adversely affect the estimated future cash flow of a financial asset, the financial asset has suffered a credit impairment. Evidence of credit impairment of financial assets includes observable information relating to:

·Major financial difficulties of the borrower or issuer;

·Default, such as delay or delay beyond a specified period;

·For economic or contractual reasons related to the borrower’s financial difficulties, the merged Consolidated Company gives the borrower concessions that the borrower would not have considered;

·The borrower is likely to file for bankruptcy or other financial restructuring; or

·The active market for the financial asset disappears due to financial difficulties.

The loss allowance for a financial asset measured at its amortized cost is deducted from the carrying amount of the asset. The allowance for losses on debt instrument investments is measured at fair value through other comprehensive income. It is adjusted and recognized as other comprehensive income (without reducing the carrying amount of the assets).

When the Consolidated Company cannot reasonably expect to recover the financial assets as a whole or in part, it will directly reduce the total book amount of its financial assets. For the Company, the Consolidated Company shall analyze the date and amount of the write-off on the basis of whether it is reasonable to expect recovery. The Consolidated Company does not expect a significant reversal of the write-off. However, financial assets that have been written off may still be enforced to comply with the procedures of the Consolidated Company for recovering overdue amounts. (7) Financial assets derecognition

When the Consolidated Company terminates the contractual rights from the cash flow of such assets or has transferred the financial assets and almost all risks and returns of the asset ownership have been transferred to other enterprises, the financial assets

158

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

shall be derecognized.

Transactions in which the Consolidated Company enters into transfers of financial assets that retain all or substantially all of the risks and rewards of ownership of the transferred assets continue to be recognized on the balance sheet.

1. Financial liabilities and equity instruments

(1) Classification of liabilities or equity

Debt and equity instruments issued by the Consolidated Company are classified as financial liabilities or equity based on the substance of the contractual agreements and the definitions of financial liabilities and equity instruments. (2) Equity transactions

An equity instrument is any contract that evidences a residual interest in the assets of the Consolidated Company after deducting all of its liabilities. Equity instruments issued by the Consolidated Company are recognized at the amount of the consideration received less direct issue costs.

(3) Compound financial instruments

The number of shares issued does not vary with the change in fair value of the compound financial instruments, which are convertible bonds (denominated in New Taiwan dollars) that the holders have the option to convert to equity.

The original recognition amount of the liability component of a compound financial instrument is measured at the fair value of a similar liability excluding the equity conversion rights. The original recognition amount of the equity component is measured as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to the carrying amounts of the original liability and equity.

After initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured after initial recognition.

Interest related to financial liabilities is recognized as profit or loss. Financial liabilities are reclassified to equity upon conversion, and no gain or loss is recognized upon conversion.

(4) Financial liabilities

Financial liabilities are classified as amortized costs or measured at fair value through profit or loss. Financial liabilities which are held for trading, derivatives or specified at the time of their original recognition are classified as being measured at fair value through profit or loss. Financial liabilities, measured at fair value through profit and loss, are measured at fair value, and the associated net benefits and losses, including any interest expense, are recognized as profit and loss.

The effective subsequent interest method for other financial liabilities is measured at the amortized cost. Interest expenses and exchange gains and losses are recognized as gains and losses. Any benefit or loss at the time of discounting is also considered as profit or loss.

(5) Derecognition of financial liabilities

The Consolidated Company derecognizes financial liabilities when contractual obligations have been fulfilled, cancelled or matured. When the terms of a financial liability are modified and the cash flows of the modified liability differ materially, the original financial liability is derecognized and a new financial liability is recognized at fair value based on the modified terms.

When derecognizing financial liabilities, the difference between carrying amount and the sum of paid or payable considerations (including any transferred non-cash capital or assumed liabilities) shall be recognized as gains and losses.

(6) Offset between financial assets and liabilities

Financial assets and financial liabilities can be offset with each other and represented on the balance sheet with net value only when the Consolidated Company has legal rights to offset and has the intention to deliver with net value as well as realize capital and liquidate the liabilities.

1. Derivative financial instruments

The Consolidated Company holds derivative financial instruments to avoid foreign currency and interest rate risks. Embedded derivatives are separated from the main

159

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

contract when specific conditions are met and the main contract is not a financial asset. Derivative instruments are initially recognized at fair value and subsequently measured at fair value, and the resulting gain or loss is recognized directly in profit or loss.

(8) Inventory

Inventory shall be measured with the lower of the costs and net realizable value. The costs include the acquisition, production and processing costs enabling them to arrive at the available places and status and other costs, which are calculated according to the standard cost method, and priced at cost transferring according to weighted mean method. The costs of the inventory of finished products and products in process include the manufacturing costs amortized based on normal production capacity according to proper percentage.

Net realizable value refers to the estimated prices under normal operation deducting estimated costs to be needed for estimated completion and estimated costs to be needed for completing selling.

• (9) Property, plant and equipment

• Recognition and measurement

Items of property, plant and equipment are measured at cost, including capitalized borrowing costs, less accumulated depreciation and any accumulated impairment. Significant components of property, plant and equipment are treated as separate items (major components) when they have different life cycles.

Gain or loss on disposal of property, plant and equipment is recognized in profit or

loss.

2. Subsequent costs

Subsequent expenses are capitalized only when it is probable that future economic benefits will flow into the Consolidated Company.

3. Depreciation

Depreciation is calculated based on the cost of the asset less its residual value and is recognized in profit or loss using the straight-line method over the estimated useful life of each component.

The land is not subject to depreciation.

The estimated useful lives for the current and comparative periods are as follows: (1) Buildings 20-40 years

(2) Machinery 2-10 years

(3) Other equipment 2-10 years

The Consolidated Company reviews the method of depreciation, durability and residual value at each reporting date and makes appropriate adjustment as necessary.

1. Reclassification to investment real estate

When real property for own use is reclassified to investment property, the real property is reclassified to investment property based on its carrying amount at the time of change of use.

(10) Investment property

Investment real estate means real property held for the purpose of earning rent or asset appreciation, or both, rather than for the purpose of production, provision of goods or services, or for administrative purposes. Investment real estate is originally measured by cost, and later measured by cost minus accumulated depreciation and accumulated impairment. The depreciation method, durable life and residual value shall be treated in accordance with the provisions of real estate, plant and equipment.

The disposal interest or loss of the investment real estate (calculated at the difference between the net disposal price and the account amount of the project) shall be recognized as the profit or loss.

The rental income of investment real estate is recognized as other income in the straight-line method during the lease term. The incentive to lease is recognized as part of the rental income during the lease term.

(11) Leasing

The Consolidated Company shall assess whether the contract is a lease or includes a lease on the date of formation of the contract. If the contract transfers control over the use of the identified assets for a period of time in exchange for consideration, the contract shall be a lease or includes a lease.

1. The lessee

The Consolidated Company recognize the right-of-use assets and lease liabilities on the beginning date of the lease. Right-of-use assets are originally measured in terms of

160

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

cost, which includes the original measured amount of lease liabilities, adjusts the lease beginning date or before payment of any rent payment, and the initial direct costs, and applied to removing the asset and restoring its location or the estimated cost of the underlying assets. It minuses the charge of any lease incentives at the same time.

Depreciation of right-of-use assets following the commencement of the lease shall be carried out by the straight-line method at the end of the useful life of right-of-use assets or earlier at the end of the lease term. In addition, the Consolidated Company will periodically evaluate whether there is any loss of right-of-use assets and deal with any loss that has occurred, and adjust the right-of-use assets in the case of lease liabilities.

Lease liabilities are defined as the present value of lease benefits not yet paid at lease commencement date. If the implied lease rate is easy to determine, the discount rate will be that rate, and if not, the incremental borrowing rate of the Consolidated Company will be used. Generally speaking, the Consolidated Company adopts its incremental borrowing rate as the discount rate.

Lease benefits measured in lease liabilities include:

(1) fixed payments, including substantive fixed payments;

• (2) depending on the variation of a certain index or rate of rent payment, the index or rate on the commencement date of the lease shall be used as the original measurement;

(3) the guaranteed amount of salvage value expected to be paid; and

(4) the price at which the option to exercise the option to purchase or terminate the lease will be reasonably determined or the penalty to be paid. Lease liabilities is then calculated using effective interest method, and the amount was measured when:

(1) changes in the index or rate used to determine lease payments result in

changes in future lease payments;

(2) the guaranteed amount of the residual value expected to be paid has changed;

(3) the evaluation of the underlying asset purchase option has changed;

(4) the estimate of whether to exercise the option of extension or termination has changed, which leads to the change of the assessment of the lease period;

(5) modification of the subject matter, scope or other terms of the lease. Lease liabilities are remeasured due to the aforementioned changes in the index or rate used to determine lease payments, changes in the residual value guarantee amount, and changes in the evaluation of purchases, extensions or termination options, the book value of right-of-use assets should be adjusted accordingly. When the book value of right-of-use assets is reduced to zero, the remaining re-measured amount is recognized in profit or loss.

For the tease modifications about the reduced coverage, the book amount of right-of-use assets will be reduced to reflect partial or total termination of Lease, and the difference between Lease assets and Lease assets will be included in the profit and loss.

The Consolidated Company will express the right-of-use assets and lease liabilities that do not conform to the definition of investment real estate in the form of single line items in the balance sheet.

1. The lessor

The transaction in which the Consolidated Company is a lessor shall be classified as a financial lease or an operating lease on the date of establishment of the lease, depending on whether or not the lease contract is transferred to almost all the risks and rewards attached to the ownership of the underlying asset. In the evaluation, the Consolidated Company shall consider certain indicators, including whether the lease term covers the principal part of the underlying asset’s economic life.

If the Consolidated Company is a sublease lessor, it will handle the master lease and the sublease transaction respectively and evaluate the sublease transaction classification based on the right-of-use assets generated from the master lease. If the principal lease is a short-term lease and a recognition waiver is applicable, the sublease transaction shall be classified as an operating lease.

• (12) Intangible assets

1. Recognition and measurement

Computer software acquired by the Consolidated Company is measured at cost less

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Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

accumulated amortization and accumulated impairment.

2. Subsequent expenditure

The subsequent expenditure can be capitalized only when they can increase the future economic benefits of relevant specific assets, and all of other expenditures are recognized as gains and losses when they occur, including the expenses for developing reputation and brand establishing.

3. Amortization

Amortization is calculated based on the cost of the asset less its estimated residual value and is recognized in profit or loss using the straight-line method over the estimated useful lives of the Intangible assets, from one to five years from the time the assets reach a ready-for-use condition.

The Consolidated Company reviews the amortization method, useful life and residual value of Intangible assets at each reporting date and makes appropriate adjustments as necessary.

(13) Non-financial asset impairment

At each reporting date, the Consolidated Company assesses whether there is any indication that the carrying amount of non-financial assets (other than inventories, deferred income tax assets) may be impaired. If any indication exists, the recoverable amount of the asset is estimated.

For the purpose of impairment testing, cash inflows that are largely independent of other individual assets or groups of assets are treated as the smallest identifiable group of assets.

The recoverable amount is the higher of the fair value less costs to dispose of the individual asset or cash-generating unit or its value in use. If the recoverable amount of an individual asset or cash-generating unit is less than its carrying amount, an impairment loss is recognized. An impairment loss is recognized immediately in profit or loss and is reduced first by the carrying amount of goodwill amortized on the cash-generating unit and then by the carrying amount of each other asset in the unit in proportion to its carrying amount.

Non-financial assets other than goodwill are reversed only to the extent that they do not exceed the carrying amount (net of depreciation or amortization) that would have been determined had no impairment loss been recognized for the asset in prior years.

(14) Provision for liabilities

Provisions are recognized as present obligations due to past events that make it probable that the Consolidated Company will need to expend economically efficient resources in the future to settle the obligation and the amount of the obligation can be reliably estimated.

The amount recognized in Provisions takes into account the risks and uncertainties of the obligation and is the best estimate of the payments required to settle the obligation at the end of the reporting period. If Provisions is measured at the estimated cash flows to settle this realistic obligation, the carrying amount is the present value of those cash flows.

(15) Income recognition

Revenue from customer contracts

Income is measured in consideration for the expected entitlement to transfer goods or services. The Consolidated Company recognizes revenue from the transfer of control of goods or services to the customer in order to meet its performance obligations.

The Consolidated Company manufactures electronic components and sells them to manufacturers in the electronics industry. The Consolidated Company recognizes revenue at the time of the transfer of control over the products. Control transfer of the product means that the product has been delivered to the customer and the customer can fully determine the sales channel and price of the product, and there is no failure to fulfill obligations that would affect the customer’s acceptance of the product. Delivery occurs when the product is shipped to a specific location, the risk of obsolescence and loss has been transferred to the customer, the customer has accepted the product in accordance with the sales contract, the acceptance terms have expired, or the Consolidated Company has objective evidence that all acceptance conditions have been met.

The Consolidated Company recognizes revenue on the basis of the net amount of the estimated discount deducted from the contract price, the amount of which is estimated based on past experiences, and only to the extent that there is a high probability that no significant turnaround will occur. As of the date of the report, the sales will expect to pay the customer for the discount, which is refunded as refund liabilities. The average credit period of sales is one hundred twenty days to one hundred fifty days, which is consistent with the practice of

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Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

the same trade, so no financing elements are included.

The Consolidated Company shall recognize accounts receivable at the time of delivery of the goods, as the Consolidated Company shall have the right to receive unconditional consideration at that time.

The time between the transfer of goods or services from all customer contracts to the customer and the time between the customer’s payments for the goods or services is expected to be no more than one year, so the Consolidated Company does not adjust the time currency value of the transaction price.

• (16) Employee benefits

1. Defined contribution plan

The contribution obligation of the defined contribution pension plan is recognized as an expense in the period in which the employees render service to the Company.

1. Defined benefit plan

The Consolidated Company’s net obligation to a defined benefit plan is measured by discounting the present value of future benefits earned by the employee’s current or prior period of service, less the fair value of the plan assets.

The defined benefit obligation is actuated annually by a qualified actuary using the projected unit benefit method. When the results of the calculation are probable to be favorable to the Consolidated Company, an asset is recognized to the extent of the present value of any economic benefits that may be obtained by returning a contribution from the plan or reducing future contributions to the plan. Any minimum funding requirement is taken into account in calculating the present value of economic benefits.

The remeasurement of the net defined benefit obligation, including actuarial gains and losses, compensation for plan assets (excluding interest), and any change in the impact of asset limits (excluding interest) is recognized immediately in other comprehensive income and accumulated in retained earnings. The Consolidated Company determines net interest expense (income) for net defined benefit liabilities (assets) using the net defined benefit liabilities (assets) and discount rate determined at the beginning of the annual reporting period. Net interest expense and other costs for defined benefit plans are recognized in profit or loss.

When a plan is revised or curtailed, changes in benefits related to prior period service costs or curtailment gains or losses are recognized immediately in profit or loss. The Consolidated Company recognizes gain or loss on the settlement of defined benefit plans when settlement occurs.

3. Short-term employee benefits

Short-term employee benefit obligations are recognized as an expense when services are provided. If the Consolidated Company has a present legal or constructive obligation to pay for services rendered by employees in the past and the obligation can be estimated reliably, the amount is recognized as a liability.

(17) Share-based payment transactions

Equity-settled share-based payment agreements recognize an expense and increase relative equity over the vesting period of the award at the grant date fair value. The expense recognized is adjusted for the number of awards that are expected to qualify for the service condition and the non-market vesting condition, and the final amount recognized is measured based on the number of awards that qualify for the service condition and the non-market vesting condition on the vesting date.

The non-vested conditions regarding share-based payment awards are reflected in the measurement of the fair value of the share-based payment awards at the date of grant and no adjustment is required to be made to verify the difference between the expected and actual results.

The fair value amount of the share appreciation rights payable to employees for cash settlement is recognized as an expense and an increase in the relative liability in the period in which the employees reach the point where they can receive unconditional compensation. The liability is remeasured at the fair value of the share appreciation rights at each reporting date and settlement date, and any change is recognized in profit or loss.

(18) Income tax

Income taxes include current and deferred income tax asset. Except those related to enterprise consolidation and items directly recognized as equities or other comprehensive income, Current tax and deferred income tax asset shall be recognized as gains and losses. Current taxes include expected payable income taxes or receivable tax rebates of the

163

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

annual taxation (losses) calculated according to the legal tax rate or substantial legal tax rate on the report day, and any unappropriated retained earnings plus 10% income tax recognized as tax expense in the shareholders meeting resolution year calculated according to the adjustments to the payable income taxes in the previous year and the provisions of income tax laws.

Deferred income tax assets are measured and recognized according to the temporary difference between the carrying amount and taxation basis of assets and liabilities with financial report objectives. In case of any of the following situations, the temporary differences will not be recognized as deferred income tax assets:

1. Those do not belong to the assets or liabilities originally recognized in the transaction of enterprise consolidation, and not influencing accounting profits and taxation incomes (losses) during the transaction.

2. Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future.

3. Original recognition of business reputation

Deferred income tax assets are recognized for unused tax losses and unused income tax credits in subsequent periods to the extent that it is probable that future taxable income will be available against which the temporary differences can be deducted. Deferred income tax assets are reassessed at each reporting date and reduced to the extent that it is not probable that the related income tax benefit will be realized, or to the extent that it becomes probable that sufficient taxable income will be available to allow the reversal of the original reduction.

Deferred income tax assets are measured according to the tax rate in the current period when the expected capital is realized or liabilities are liquidated and based on the legal tax rate or substantial legal tax rate on the report day.

• Only when the Consolidated Company shall meet the following conditions at the same

• time, can the deferred income tax assets and deferred tax liabilities offset with each other: 1. Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and

• Deferred income tax assets and deferred tax liabilities are related to one of the subjects of tax payment from which the same tax authority levies income tax;

  • (1) Same subject of tax payment; or

  • (2) Different subjects of tax payment, but all subjects intend to liquidate the current tax liabilities and assets based on net amount or at the same time realize assets and liquidate liabilities in each of the future periods when deferred income tax assets of major amounts are expected to be recovered and deferred tax liabilities expected to be liquidated.

• (19) Business combination

Goodwill is measured at the fair value of the consideration transferred at the date of acquisition, including the amount of any non-controlling interest attributable to the acquiree, less the net amount of identifiable assets acquired and liabilities assumed (usually the fair value). If the resulting balance is negative, the Consolidated Company reassesses whether all assets acquired and liabilities assumed have been correctly identified before recognizing gain recognized in bargain purchase transaction in profit or loss.

Transaction costs associated with a business combination, except for those related to the issuance of debt or equity instruments, are recognized as expenses of the Consolidated Company immediately upon incurrence.

Non-controlling interest of the acquiree, which is a present ownership interest and the holder of which is entitled to a proportionate share of the net assets of the enterprise at the time of liquidation, is measured at fair value at the acquisition date or at the present ownership instrument's proportionate share of the recognized amount of the acquiree's identifiable net assets, at the option of the Consolidated Company, on a transaction by transaction basis. Other non-controlling interests are measured at their fair values on the acquisition date or on other bases as prescribed by IFRSs recognized by the FSC. (20) Earnings per share

The Consolidated Company lists the basic and diluted earnings per share of holders of common stock equity of the Company. The basic earnings per share of the Consolidated Company shall be calculated with the gains and losses of the holders of common stock equity of the Company divided by the weighted mean of current outstanding common shares. Diluted earnings per share shall be calculated after adjusting the influence of all potential diluted common shares of the gains and losses of the holders of common stock equity of the

164

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Company and the weighted mean of current outstanding common shares. The potential diluted common shares of the Consolidated Company include convertible corporate bonds and stock options for employees.

(21) Segmental Information

An operating segment is a component of the Consolidated Company that engages in operating activities that may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the Consolidated Company. The operating results of all operating segments are reviewed regularly by the Consolidated Company's chief operating decision maker to make decisions about the allocation of resources to the segment and to evaluate its performance. Separate financial information is available for each operating segment.

V. Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties

Management is required to make judgments, estimates and assumptions in preparing the Consolidated Financial Statements in accordance with Guidelines Governing the Preparation of Financial Reports by Securities Issuers and IFRSs approved by the FSC that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from estimates.

The management authority continuously inspects the estimate and basic assumption, and accounting changes are recognized during the period of changes and the period of future to be influenced.

The following assumptions and estimates are subject to significant risks of material adjustments to the carrying amounts of assets and liabilities in the next financial year, and the related information is as follows:

Inventory evaluation

Since inventory must be measured at the lower of cost or net realizable value, the Consolidated Company estimates the reported amount of inventory due to normal wear and tear, obsolescence, or no market sale value daily and reduces the cost of inventory to net realizable value. The net realizable value of inventories may change significantly due to rapid changes in the industry and the introduction of new products. Please refer to Note VI (4) for the inventory assessment.

VI. Descriptions for Important Accounting Items

(1) Cash and cash equivalents

ssment. riptions for Important Accounting Items Cash and cash equivalents
Petty cash Checks and demand deposits Time deposits Cash and cash equivalents listed on the Statement of Cash Flows	Dec. 31, 2021 $ 5,227 2,554,367 743,468 $ 3,303,062		Dec. 31, 2020 2,139 2,169,311 777,962 2,949,412

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Consolidated Company are seen in Note VI (27).

(2) Financial assets

1. Financial assets measured at FVTPL

Financial assets mandatorily measured at FVTPL: Current: Non-hedging derivatives Forward exchange contracts Financial products Non-derivative financial assets Shares of listed ("OTC") companies Subtotal Non-current Non-hedging derivatives	Dec. 31, 2021 $ 223 62,164 91,737	Dec. 31, 2020 6,180 - 116,780
	154,124	122,960

165

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Embedded derivatives—right of redemption Total	3,370 - $ 157,494 122,960

Please refer to Note VI (14) for the disclosure of embedded derivatives of the convertible bonds issued by the Consolidated Company.

The Consolidated Company accounts for the financial products it undertakes on the basis of the subscription amount at the time of original recognition. The revenue is calculated on a daily basis based on the balance of the financial products account and the applicable performance basis, and the revenue is recognized as a quarterly dividend. Please refer to Note VI (27) for the amount recognized in profit or loss based on fair value remeasurement.

The Consolidated Company engages in derivative financial instruments to hedge its exposure to exchange rate risk arising from operating activities. The breakdown of derivative instruments reported as financial assets measured at FVTPL for non-applicable hedge accounting is as follows:

Financial assets	Dec. 31, 2021	Dec. 31, 2021
	Contract principal (NT$ 1,000) USD 2,000	Maturity
Forward exchange contracts Financial assets
	Contract principal (NT$ 1,000) USD 3,000	Maturity
Forward exchange contracts " " " " " " " " " " " " " "		2021.01.08 2021.01.11 2021.01.12 2021.01.20 2021.01.22 2021.01.28 2021.02.09 2021.02.18 2021.02.19 2021.02.23 2021.02.24 2021.02.26 2021.03.10 2021.03.15 2021.03.23
	USD 4,000
	USD 2,000
	USD 9,000
	USD 2,000
	USD 4,000
	USD 5,000
	USD 2,000
	USD 2,000
	USD 2,000
	USD 9,000
	USD 4,000
	USD 6,000
	USD 4,400
	USD 2,000

2. Financial assets measured at FVTOCI

Equity instruments measured at FVTOCI: Current: Domestic unlisted (or OTC) stock - AICP Technology Corporation Non-current: Domestic listed stock - Chailease Finance Co., Ltd. Domestic unlisted (or OTC) stock—SteadyBeat Technology Corporation Domestic unlisted (or OTC) stock—G-sau Co., Ltd Subtotal Total	Dec. 31, 2021 $ 1,456 20,503 8,545 955	Dec. 31, 2020 2,016 20,120 - - 20,120 22,136
	30,003
	$ 31,459

The Consolidated Company’s investments in these equity instruments are not held for trading purposes and have been designated as measured at FVTOCI.

The Consolidated Company has no dividend income from equity instruments measured at FVTOCI as listed above for the year 2021 and 2020.

166

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

On May 8, 2020, due to the consideration of asset allocation and adjustment of investment portfolio to diversify risks, the Consolidated Company sold KUANG YING COMPUTER EQUIPMENT CO., LTD. which was designated to be measured at fair value through other comprehensive income, and the fair value at the time of disposal was $4,860 thousand and the accumulated loss on disposal was $10,140 thousand, therefore, the aforementioned accumulated loss on disposal was transferred from other equity to retained earnings.

As of December 31, 2021 and 2020, none of the Consolidated Company’s financial assets had been pledged as collateral.

(3) Notes receivable, accounts receivable and other receivables

Notes receivable Accounts receivable Other receivables Less: provisions	Dec. 31, 2021 $ 61,292 8,754,191 462,226 (20,472) $ 9,257,237	Dec. 31, 2020 54,105 6,852,928 359,009 (14,029) 7,252,013

For the changes in the provisions for notes and accounts receivable for the years 2021 and 2020, please refer to Note VI (24) 1. (3) Statement of Impairment Losses. (4) Inventory

Merchandises Finished goods Work in process Raw materials	Dec. 31, 2021 $ 1,053,144 1,287,744 1,008,724 741,775 $ 4,091,387	Dec. 31, 2020 773,548 676,044 695,361 414,075 2,559,028

The Consolidated Company’s inventory as of December 31, 2021 and 2020 including allowance for inventory losses are NT$372,177 thousand dollars and NT$295,528 thousand dollars respectively.

The Consolidated Company recognized inventory-related expenses (gain) as follows:

Cost of goods sold Downtime costs Inventory valuation and disposal loss Total	2021 $ 12,742,203 - 92,408 $ 12,834,611	2020 10,222,310 90,799 48,028 10,361,137

As of December 31, 2021 and 2020, the Consolidated Company’s inventories were not pledged as security.

• (5) Changes in ownership interests in subsidiaries

• Acquisition of subsidiaries

  • (1) Zhongshan Jinmeida Metal Surface Treatment Co., Ltd.

The Consolidated Company acquired substantive control over Zhongshan Jinmeida Metal Surface Treatment Co. ("Jinmeida"), a surface treatment company for hardware and plastic parts. The acquisition of control over Jinmeida will enable the Consolidated Company to expand its plating capacity for the production of connectors.

For the period from the acquisition date to December 31, 2021, the revenue and net loss contributed by Jinmeida were $0 thousand and $889 thousand, respectively. If this acquisition had occurred on January 1, 2021, management estimates that the revenue and net income of the Consolidated Company would have been $21,391,917 thousand and $3,518,267 thousand, respectively, for the period. These amounts do not reflect the actual revenue and operating results that the Consolidated Company would have generated if the business combination had been completed at the beginning of the year in which the acquisition occurred, and should not be used as a forecast of future operating results.

Costs incurred in connection with this acquisition transaction were recognized in the consolidated statement of income under the heading "administration expense". The major categories of the consideration transferred, the assets acquired and liabilities assumed at the date of acquisition and the amounts recognized are as follows. A. Net cash outflow from acquisition of subsidiaries Consideration paid in cash $ 96,793

167

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

B. Identifiable assets acquired and liabilities assumed

. Identifiable assets acquired and liabilities assumed	. Identifiable assets acquired and liabilities assumed
The fair values of the identifiable assets acquired and liabilities		assumed at the
date of acquisition were as follows: Right-of-use assets	$	96,875
Other payables Fair value of identifiable net assets	$	(82) 96,793

The Consolidated Company will keep the above matters under review during the measurement period. If new information becomes available within one year of the acquisition date regarding facts and circumstances existing at the acquisition date that would identify adjustments to the provisional amounts described above or any additional provisions for liabilities existing at the acquisition date, the accounting for the acquisition will be modified.

(2) Genie Precision Machine Co., Ltd.

On May 13, 2020, the Consolidated Company acquired control of Genie Precision Machine Co., Ltd. (GPM) by acquiring 63.93% of the shares of GPM, an ultra-precision optical and automation equipment manufacturer, and the acquisition of control of GPM will enable the Consolidated Company to expand its automotive electronics operations.

For the period from the acquisition date to December 31, 2020, the revenue and net income contributed by GPM were NT$220,334 thousand and NT$21,514 thousand, respectively. If the acquisition had occurred on January 1, 2020, management estimates that the Consolidated Company's revenue from January 1, 2020 to December 31, 2020 would have been NT$17,390,647 thousand and net income would have been NT$2,845,280 thousand. These amounts do not reflect the actual revenue and results of operations of the Consolidated Company if the business combination were to be completed on the commencement date of the year of acquisition and shall not be used as a forecast of future results of operations.

Costs incurred in connection with this acquisition transaction were recognized under “administrative expenses” in the Consolidated Statement of Comprehensive Income.

The major categories of the consideration transferred, the assets acquired, and liabilities assumed at the date of acquisition and the amounts recognized are as follows: A. Net cash used in acquisition of subsidiaries

. Net cash used in acquisition of subsidiaries
Consideration paid in cash Less: Balance of cash and cash equivalents acquired	$ 78,533 (18,886)
	$ 59,647

B. Identifiable assets acquired and liabilities assumed

. Identifiable assets acquired and liabilities assumed	. Identifiable assets acquired and liabilities assumed
The fair values of the identified assets acquired and liabilities		assumed at the
date of acquisition are as follows:
Current assets
Cash and cash equivalents	$	18,886
Financial assets measured at amortized cost		5,009
Notes receivable, accounts receivable and other receivables		116,145
Inventory		144,150
Other current assets		12,297
Non-current assets
Property, plant and equipment		214,258
Intangible assets		1,054
Deferred tax assets		6,190
Other non-current assets		53,033
Current liabilities
Short-term loans		(36,680)
Contract liabilities - current		(34,282)
Notes payable, accounts payable and other payables		(142,001)
Income tax liabilities for the period - current		(7,955)
Long-term loans due within one year		(29,491)
Other non-current liabilities - other		(1,097)

168

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Non-current liabilities Long-term loans Other non-current liabilities Fair value of identifiable net assets	(100,053) (76,191)
	$ 143,272

The fair value of receivables (mainly accounts receivable) and the total contract amount were both $116,145 thousand, and there were no unrecoverable contractual cash flows expected at the date of acquisition.

The Consolidated Company will review the above matters on an ongoing basis during the measurement period. If, within one year of the acquisition date, new information becomes available regarding facts and circumstances existing at the acquisition date that would identify an adjustment to the provisional amount described above or any additional provision for liabilities existing at the acquisition date, the accounting for the acquisition will be modified.

C. Gain recognized in bargain purchase transaction

The gain recognized in bargain purchase transaction for follows: Consideration transferred Add: Non-controlling interests Less: Fair value of identifiable net assets Gain recognized in bargain purchase transaction	acquisition is as $ 78,533 51,684 (143,272)
	$ (13,055)

The Consolidated Company's gain of NT$13,055 thousand from the acquisition of GPM is reported in “gain recognized in bargain purchase transaction” in the Consolidated Statement of Comprehensive Income.

2. Acquisition of additional equity interests in subsidiaries

On July 23, 2021, the Consolidated Company invested $5,471 thousand in cash in Lerain Technology Co., Ltd., increasing its interest in Lerain Technology Co., Ltd. by 1.62%.

The effect of the change in the Consolidated Company's ownership interest in the subsidiaries listed above on the equity attributable to the owners of parent is as follows:

Carrying amount of non-controlling interests acquired Consideration paid to non-controlling interests Capital reserves - the difference between the actual acquisition or disposal price and the carrying amount of the subsidiary	2021 $ 4,513 (5,471) $ (958)

1. The Consolidated Company did not subscribe to the subsidiary's cash capital increase in proportion to its shareholding, which did not result in a loss of control On October 20, 2021, Compertum Microsystems Inc. issued 975 thousand new shares for total proceeds of $9,750 thousand and the Consolidated Company reduced its interest in Compertum Microsystems Inc. by 4.80% due to no subscription.

On September 15, 2021, Lerain Technology Co., Ltd. issued 11,193 thousand new shares with total funds raised of NT$111,929 thousand. The Consolidated Company's interest in Lerain Technology Co., Ltd. decreased by 11.03% as the Consolidated Company did not subscribe.

On May 14, 2021, Lerain Technology Co., Ltd. issued 12,683 thousand new shares with total funds raised of NT$126,832 thousand. The Consolidated Company subscribed 3,794 thousand shares for NT$37,935 thousand, and the Consolidated Company's interest in Lerain Technology Co., Ltd. increased by 7.94% because the shares were not subscribed in proportion to its shareholding.

On April 8, 2021, Good News Medical Co., Ltd. issued 2,000 thousand new shares with total funds raised of NT$20,000 thousand. The Consolidated Company subscribed 611 thousand shares for NT$6,110 thousand, and the Consolidated Company's interest in Good News Medical Co., Ltd. increased by 20.44% because the shares were not subscribed in proportion to its shareholding.

On January 31, 2021, Lerain Technology Co., Ltd. issued 2,210 thousand new shares with total funds raised of NT$22,100 thousand. The Consolidated Company's interest in Lerain Technology Co., Ltd. decreased by 15.06% as the Consolidated Company did not subscribe.

169

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

On December 16, 2020, Compertum Microsystems Inc. issued 3,255 thousand new shares for total proceeds of $75,950 thousand. The Consolidated Company subscribed 1,755 thousand shares for $40,950 thousand, which increased the Consolidated Company's interest in Compertum Microsystems Inc. by 4.64% because the subscription was not proportional to its shareholding.

On July 8, 2020, Genie Precision Machine Co., Ltd. issued 15,000 thousand new shares with total funds raised of NT$150,000 thousand. The Consolidated Company subscribed 8,630 thousand shares for NT$86,300 thousand, and the Consolidated Company's interest in Genie Precision Machine Co., Ltd. decreased by 3.93% because the shares were not subscribed in proportion to its shareholding.

On April 30, 2020, Compertum Microsystems Inc. issued 1,379 thousand new shares with total funds raised of NT$13,786 thousand. The Consolidated Company's interest in Compertum Microsystems Inc. decreased by 9.91% as the Consolidated Company did not subscribe.

The effect of changes in the Consolidated Company's ownership interest in the subsidiaries listed above on the equity attributable to owners of parent was as follows:

Increase in equity after issuance of new shares by subsidiaries Amount not subscribed in proportion to shareholding Capital reserves - recognition of changes in ownership interests in subsidiaries	2021 $ 50,463 (44,045)	2020 125,937 (127,250)
	$ 6,418	(1,313)

(6) Subsidiaries with significant non-controlling interests

The non-controlling interests of subsidiaries that are material to the Consolidated Company are as follows:

Name of subsidiary Lintes Technology Co., Ltd.	Principal place of business/country of incorporation Taiwan	The percentage of ownership interests and voting interests in all non-controlling interests Dec. 31, 2021 Dec. 31, 2020 47.87% 47.87%
		Dec. 31, 2021
		47.87%

The aggregate financial information of the above subsidiaries is as follows. The financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs) approved by the Financial Supervisory Commission (FSC), and the financial information represents amounts before the elimination of intercompany transactions:

1. Comprehensive financial information of Lintes Technology Co., Ltd.:

Current assets Non-current assets Current liabilities Non-current liabilities Less: Non-controlling interests Equity attributable to owners of Lintes Technology Co., Ltd. Closing balance of non-controlling interests attributable to the Consolidated Company Operating revenue Net profit for the period Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Other comprehensive income	Dec. 31, 2021 $ 2,345,154 778,760 (1,191,923) (102,650) 135,679	Dec. 31, 2020 2,297,917 523,357 (954,458) (75,631) 128,484
	$ 1,693,662	1,662,701
	$ 810,795	795,973
	2021 $ 2,473,397	2020 2,404,160
	$ 174,032	271,870
	$ 11,107	7,660

170

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Total of comprehensive income Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Net income of the Consolidated Company for the period attributable to non-controlling interests Comprehensive income of the Consolidated Company for the period attributable to non-controlling interests Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes Increase (decrease) in cash and cash equivalents Dividends paid to non-controlling interests	$ 228	4,544 - 276,414 7,660 126,891 130,604 2020 468,996 (201,405) (307,339) (535) (40,283) 49,117
	$ -
	$ 174,260
	$ 11,107
	$ 83,313
	$ 83,422
	2021 $ 59,731 (368,009) 169,527 1,473
	$ (137,278)
	$ 68,218

(7) Property, plant and equipment

The changes in the costs of the property, plant and equipment, losses on depreciation and impairment of the Consolidated Company are as follows:

Cost or deemed cost: Balance on January 1, 2021 Addition Prepayment for equipment transferred in Completion of construction in progress and acceptance of equipment to be examined Disposal Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Addition Prepayment for equipment transferred in	Land $ 48,584 162,671 - 31,235 - (571)	Buildings	Machinery equipment 2,951,297 787,812 41,990 11,037 (54,588) (16,255)	Other 3,275,852 1,708,481 23,195 342,814 (526,010) (12,465)	Outstanding work and equipment to be inspected 1,334,576 938,022 - (1,133,871) - (5,622) 1,133,105 756,731 1,315,625 -	Total 8,379,722 3,669,850 123,689 (217) (580,598) (37,919)
		769,413 72,864 58,504 748,568 - (3,006)
	$ 241,919	1,646,343	3,721,293	4,811,867		11,554,527
	$ 49,655 - -	759,739 - -	2,698,613 236,776 10,959	2,740,900 221,896 11,887		7,005,638 1,774,297 22,846

171

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Acquired by business combinations Completion of construction in progress and acceptance of equipment to be examined Disposal Reclassification to other non-current assets Effect of change in exchange rate Balance on December 31, 2020 Losses on depreciation and impairment: Balance on January 1, 2021 Depreciation in the year Disposal Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Depreciation in the year Acquired by business combinations Disposal Effect of change in exchange rate Balance on December 31, 2020 Book value: September 31, 2021 September 31, 2020	- - - - (1,071)	- - - - 9,674	211,567 - (232,957) - 26,339	105,389 759,336 (607,611) - 44,055	- (759,336) - (169) 21,725	316,956 - (840,568) (169) 100,722
	$ 48,584	769,413	2,951,297	3,275,852	1,334,576	8,379,722
	$ - - - -	309,715 58,462 - (1,344)	1,700,534 246,571 (43,059) (11,040)	1,873,499 1,060,855 (515,222) (6,630)	- - - -	3,883,748 1,365,888 (558,281) (19,014)
	$ -	366,833	1,893,006	2,412,502	-	4,672,341
	$ - - - - -	266,518 38,748 - - 4,449	1,595,925 237,015 62,001 (203,679) 9,272	1,628,481 782,468 40,697 (601,212) 23,065	- - - - -	3,490,924 1,058,231 102,698 (804,891) 36,786
	$ -	309,715	1,700,534	1,873,499	-	3,883,748
	$ 241,919	1,279,510	1,828,287	2,399,365	1,133,105	6,882,186
	$ 48,584	459,698	1,250,763	1,402,353	1,334,576	4,495,974

The subsidiary, Lotes Zhongshan Co., Ltd, acquired the land use rights for the construction of the new plant in 2017, and the acquisition cost was NT$183,934 thousand to list right-of-use assets in the account. As of December 31, 2021 and December 31, 2020, the accumulated expenditures (tax included) for the construction of the new plant were NT$1,081,382 thousand and NT$787,873 thousand, respectively. The subsidiary, Lotes Hengnan Co., Ltd., acquired the land use rights for the construction of the new plant in 2016, and the acquisition cost was NT$9,878 thousand to list

172

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

right-of-use assets in the account. As of December 31, 2021 and December 31, 2020, the accumulated expenditures (tax included) for the construction of the new plant were NT$307,045 thousand and NT$192,369 thousand, respectively.

In April, 2019, subsidiary, Lotes Zhongshan Co., Ltd, signed the pre-purchase contract and decoration contract with Zhongshan Willie Property Development Co., Ltd. and Tianjin Xinhong Yuanchuang Decoration Engineering Co., Ltd., respectively. As of December 31, 2021, has to pay the price of RMB 10,881 thousand and RMB 3,285 thousand respectively (accounted in buildings), which were handed over in December 2021 for application of housing certificates.

As of December 31, 2021 and December 31, 2020, property, plant and equipment were used as collateral for short-term loans and financing lines. Please refer to Note VIII for details.

(8) Right-of-use assets

The changes in the costs of the lease of lands, buildings, machinery and other equipment, losses on depreciation and impairment of the Consolidated Company are as follows:

Cost of right-of-use assets: Balance on January 1, 2021 Acquisition by business combinations Increase Decrease Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Increase Decrease Effect of change in exchange rate Balance on December 31, 2020 Depreciation and impairment loss on right-of-use assets: Balance on January 1, 2021 Depreciation for the period Decrease Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Depreciation for the period Decrease Effect of change in exchange rate Balance on December 31, 2020 Book value: September 31, 2021 September 31, 2020	Land $ 240,690 96,875 299,921 - (900)	Buildings 347,687 - 426,533 (220,289) (1,083)	Machinery - - - - -	Other 4,131 - - (3,706) (22)	Total 592,508 96,875 726,454 (223,995) (2,005)
	$ 636,586	552,848	-	403	1,189,837
	$ 236,908 - - 3,782	254,674 136,339 (48,337) 5,011	687 - (685) (2)	5,181 397 (1,507) 60	497,450 136,736 (50,529) 8,851
	$ 240,690	347,687	-	4,131	592,508
	$ 10,465 10,606 - (38)	179,759 144,200 (183,101) (794)	- - - -	2,535 1,436 (3,706) (14)	192,759 156,242 (186,807) (846)
	$ 21,033	140,064	-	251	161,348
	$ 5,150 5,135 - 180	105,843 117,728 (48,186) 4,374	687 - (685) (2)	2,344 1,658 (1,507) 40	114,024 124,521 (50,378) 4,592
	$ 10,465	179,759	-	2,535	192,759
	$ 615,553	412,784	-	152	1,028,489
	$ 230,225	167,928	-	1,596	399,749

(9) Investment property

The changes in the investment property of the Consolidated Company are as follows:

Right-of-use

173

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Cost or deemed cost: Balance on January 1, 2021 Addition Other Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Addition Effect of change in exchange rate Balance on December 31, 2020 Losses on depreciation and impairment: Balance on January 1, 2021 Depreciation Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Depreciation Effect of change in exchange rate Balance on December 31, 2020 Book value: September 31, 2021 September 31, 2020 Fair value: September 31, 2021 September 31, 2020	Self-owned assets Land Buildings $ 260,576 44,832 - 1,516 - - - -	Self-owned assets Land Buildings $ 260,576 44,832 - 1,516 - - - -	assets Land 69,160 - (31,634) (328)	assets Land 69,160 - (31,634) (328)	Total 374,568 1,516 (31,634) (328)
	Land $ 260,576 - - -
	$ 260,576	46,348	37,198		344,122
	$ 248,200 12,376 -	39,285 5,547 -	- 67,869 1,291		287,485 85,792 1,291
	$ 260,576	44,832	69,160		374,568
	$ - - -	5,481 1,187 -	1,068 521 (4)		6,549 1,708 (4)
	$ -	6,668	1,585		8,253
	$ - - -	4,483 998 -	- 1,048 20		4,483 2,046 20
	$ -	5,481	1,068		6,549
	$ 260,576	39,680	35,613		335,869
	$ 260,576	39,351	68,092		368,019
				$ 466,940
				$ 467,325

As of December 31, 2021 and December 31, 2020, the Consolidated Company’s investment properties were not pledged as security.

(10) Intangible assets

The changes in the cost and amortization of the intangible assets of the Consolidated Company are as follows:

Cost: Balance on January 1, 2021 Acquired separately Derecognition Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Acquired separately Acquired in business combination Derecognition Effect of change in exchange rate Balance on December 31, 2020 Losses on amortization and impairment: Balance on January 1, 2021 Amortization for the period Derecognition Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Amortization for the period	$	Computer Software 253,415 101,755 (47,908) (374)		Other 600 - - -		Total 254,015 101,755 (47,908) (374) 307,488 166,821 80,912 5,054 (412) 1,640 254,015 98,505 51,497 (47,908) (190) 101,904 67,032 27,071
	$	306,888		600
	$	166,221 80,912 5,054 (412) 1,640		600 - - - -
	$	253,415		600
	$	98,505 51,497 (47,908) (190)		- - - -
	$	101,904		-
	$	67,032 27,071		- -

174

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Acquired in business combination Derecognition Effect of change in exchange rate Balance on December 31, 2020 Book value: Balance on December 31, 2021 Balance on December 31, 2020	4,000 (412) 814 $ 98,505 $ 204,984 $ 154,910	- - - - 600 600	4,000 (412) 814 98,505 205,584 155,510

The amortization expenses of the intangible assets of the Consolidated Company was recognized in the following items in the Consolidated Statement of Comprehensive Income:

110 年度 Operating cost $ 1,815 Operating expense $ 49,682 ther financial assets The details of the other financial assets of the Consolidated Company are as follows: Dec. 31, 2021 Other financial assets - current Time deposits $ -	109 年度
	3,390
	23,681
	Dec. 31, 2020 87,320

(11) Other financial assets

As of December 31, 2021 and December 31, 2020, the Consolidated Company's other financial assets were not pledged as collateral.

(12) Short-term loans

The details, conditions and terms of the short-term loans of the Consolidated Company are as follows:

Bank loans - credit loans Total Remaining credit Bank loans - credit loans Remaining credit		Dec. 31, 2021		Amount $ 742,178 400,000 $ 1,142,178 $ 2,261,906 Amount $ - $ 1,556,320
	Currency USD NTD	Interest rate range	Maturity 2022 2022
		0.70%~0.88% 0.85% Dec. 31, 2020
	Currency -	Interest rate range -	Maturity -

Please refer to Note VI (27) for more information on the Consolidated Company’s exposure to interest rate and foreign currency risk, Note VIII for information of the Consolidated Company’s assets pledged as collateral for short-term loans, and Note IX for information of the guaranteed notes opened due to bank loans and financing facilities.

(13) Long-term loans

The breakdown of the Consolidated Company's long-term loans is as follows:

Bank loans—credit loans (The expiry date is May 2022 and July 2023, respectively) Bank loans—guaranteed loans (The expiry date is December 2036 and July 2023, respectively) Subtotal Less: portion due within one year Total Remaining credit Interest rate range	Dec. 31, 2021		Dec. 31, 2020 974 23,022 23,996 5,335 18,661 51,907 1.31%~1.83%
	$ 14,805 29,600
	44,405 14,805
	$ 29,600
	$ 1,895
	1.25%~1.36%

For details of the guarantees provided by the Consolidated Company for bank loans using assets pledged as collateral, please refer to Note VIII.

(14) Bonds payable

Information on the issuance of unsecured convertible bonds by the Consolidated Company is as follows:

Total amount of convertible bonds issued

Dec. 31, 2021 $ 1,000,000

175

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Accumulated converted amount Unamortized balance of discount on bonds payable Bonds payable at the end of the period Embedded derivative - right of redemption(reported as financial assets measured at FVTPL) Equity components - conversion rights (reported in capital reserves - stock options) Right of redemption valuation benefit (reported in other gains and losses) Interest expense	(63,900) (24,173) $ 911,927 $ 3,370 $ 171,527 2021 $ 2,700 $ 3,530

On August 19, 2021, the Company issued 10,000 domestic first three-year unsecured convertible bonds with a coupon rate of 0%, which are repayable in cash at par on maturity.

The conversion price was set at NT$563.2 per share at the time of issuance. If the conversion price of the Company's common stock is subject to adjustment in accordance with the terms of the issuance, the conversion price will be adjusted in accordance with the formula stipulated in the terms of the issuance. The conversion price as of December 31, 2021 is $547.5. There is no reset clause in the bonds.

If the right of redemption meets one of the following criteria, the Company will redeem the outstanding bonds at par value in cash:

1. The closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by 30% or more for 30 consecutive business days from the day after the third month of the issuance of the bonds to the 40th day prior to the expiration of the issuance period.

2. If the closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by 30% or more for 30 consecutive business days from the day after the third month of the issuance of the bonds to the 40th day prior to the expiration of the issuance period.

In fiscal 2021, the bondholders requested to convert 639 of the Company's first three-year domestic unsecured convertible bonds with a total carrying amount of $62,250 thousand, and the net change in capital reserves resulting from the bond conversion was $60,853 and the capital stock resulting from the bond conversion was $1,167 thousand, as described in Note VI (21).

(15) Lease liabilities

The book values of the lease liabilities of the Consolidated Company are as follows:

Dec. 31, 2021 Current $ 220,742 Non-current $ 285,847 For the maturity analysis, please refer to Note VI (27). The amounts recognized in profit or loss are as follows: 2021 Interest expense for lease liabilities $ 18,824 Changes in lease payments not included in the measurement of lease liabilities $ 4,390 Income from the sublease of right-of-use assets $ 23,982 Expenses for short-term leases $ 21,493 Cost of low-value leased assets (excluding low-value leases under short-term leases) $ 307 The amounts recognized in the Statement of Cash Flows are as follows: 110 年度 Total cash outflow from leases $ 401,473	Dec. 31, 2021 $ 220,742	Dec. 31, 2020 71,971
	$ 285,847	104,279
	2021 $ 18,824	2020 9,689
	$ 4,390	-
	$ 23,982	12,523
	$ 21,493	1,738
	$ 307	-
		109 年度 125,601

1. Lease of land, premises and buildings

The Consolidated Company leases land, premises and buildings for plant, office space and staff quarters. The lease term of the plant and office space is usually one to ten years, and the lease term of the staff quarters is three to eight years. Part of the lease includes an option to extend the lease at the end of the lease term. In cases where it is not reasonably determined to exercise an optional extension of lease term, the relevant benefits for the period covered by the option are not included in the lease liabilities. The Consolidated Company is a sublease of right-of-use assets by business lease.

1. Other leases

176

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The leasing period of machines and other equipment leased by the Consolidated Company shall be two to six years. In addition, the lease term of some lease contracts of the Consolidated Company is one year, and these leases are short-term subject leases. The Consolidated Company chooses to apply the exemption of relevant right-of-use assets and lease liabilities.

(16) Refund liabilities - current

Refund liabilities - current

Dec. 31, 2021 $ 195,105	Dec. 31, 2020 161,767

The refund liabilities are mainly the prepayments to customers for the sales discount and defects of electronic components.

(17) Provision for liabilities

Provision for liabilities - non-current Employee benefits	Dec. 31, 2021 $ 45,220	Dec. 31, 2020 49,258

Employee benefits are estimated under the Consolidated Company’s defined benefit plan. Please refer to Note VI (19).

(18) Operating lease

The Consolidated Company leases its investment real estate, which is classified as an operating lease because almost all risks and rewards belonging to the ownership of the underlying asset have not been transferred. Please refer to Note VI (9) for details of the investment real estate.

The maturity analysis of lease payments is presented in the following table for the total undiscounted lease payments to be received after the reporting date:

Not more than 1 year 1-2 years Total undiscounted lease payment	Dec. 31, 2021 $ 609 130	Dec. 31, 2020 4,330 350
	$ 739	4,680

In year 2021 and 2020, the income tax generated in the investment property from rentals were NT$4,247 thousand and NT$4,727 thousand, respectively, and the direct operating expenses (including maintenance) incurred in the investment property from rentals were NT$860 thousand and NT$861 thousand, respectively. (19) Employee benefits

1. Defined benefit plans

A reconciliation of the present value of the Company's defined benefit obligation to the fair value of plan assets is as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability The Consolidated Company's employee benefit liabilities ar Paid leave liability	Dec. 31, 2021 $ 78,057 (32,837)	Dec. 31, 2020 83,499 (34,241)
	$ 45,220	49,258
	e as follows: Dec. 31, 2021 $ 22,347	Dec. 31, 2020 17,861

The Company's defined benefit plan is contributed to the Bank of Taiwan's Labor Retirement Reserve Fund. Retirement payments to each employee under the Labor Standards Act are based on the basis of the number of years of service and the average salary for the six months prior to retirement. (1) Composition of plan assets

The Company's pension fund under the Labor Standards Act is managed by the Bureau of Labor Funds, Ministry of Labor (hereinafter referred to as the Bureau of Labor Funds). According to the "Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund", the minimum annual earnings to be distributed to the fund shall not be less than the earnings calculated based on the two-year time deposit interest rate of the local bank.

As of the date of this report, the balance of the Bank of Taiwan's Labor Retirement Reserve Fund was $32,837 thousand. For information on the use of the Labor Pension Fund assets, including the fund yield and fund asset allocation, please refer to the website of the Bureau of Labor Funds, Ministry of

177

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Labor.

• (2) Changes in the present value of the defined benefit obligation

The changes in the present value of the Company's defined benefit obligation for fiscal 2021 and 2020 are as follows:

Defined benefit obligation at January 1 Current service cost and interest Remeasurement of net defined benefit liability (asset) Benefits planned to be paid Defined benefit obligation at December 31	2021 $ 83,499 951 (3,373) (3,020)	2020 73,681 1,168 8,650 -
	$ 78,057	83,499

• (3) Changes in the fair value of plan assets

The changes in the fair value of the Company's defined benefit plan assets for fiscal 2021 and 2020 are as follows:

Fair value of plan assets as of January 1 Interest income Remeasurement of net defined benefit liability (asset) Amount contributed to the plan Benefits paid under the plan Fair value of plan assets at December 31	2021 $ 34,241 119 477 1,020 (3,020)	2020 31,952 238 1,052 999 -
	$ 32,837	34,241

• (4) Expenses recognized in profit or loss

The expenses recognized in profit or loss in fiscal 2021 and 2020 were as follows:

Current service cost Net interest on net defined benefit liability Operating cost Promotion expense Administration expense R&D expense	2021 $ 662 170	2020 621 309
	$ 832	930
	$ 110 286 277 159	115 290 337 188
	$ 832	930

(5) Remeasurement of net defined benefit liability (asset) recognized as other comprehensive income

The remeasurements of net defined benefit liability (asset) recognized as other comprehensive income in fiscal 2021 and 2020 are as follows:

2021 2020 Accumulated balance as of January 1 $ (5,703) 1,895 Recognized in the current period 3,851 (7,598) Accumulated balance as of December 31 $ (1,852) (5,703) ) Actuarial assumptions The significant actuarial assumptions used to determine the present value of the Company's defined benefit obligation at the end of the financial reporting period are as follows: Dec. 31, 2021 Dec. 31, 2020 Discount rate 0.70% 0.35% Future salary increases 2.00% 2.00%	2021 $ (5,703) 3,851	2020 1,895 (7,598)
	$ (1,852)	(5,703)
		0.35% 2.00%

• (6) Actuarial assumptions

The significant actuarial assumptions used to determine the present value of the Company's defined benefit obligation at the end of the financial reporting period are as follows:

The Company expects to make a contribution of $1,002 thousand to the defined benefit plan in the year following the fiscal 2021 reporting date.

The weighted-average duration of the defined benefit plan is 10 years.

• (7) Sensitivity analysis

The effect of changes in key actuarial assumptions on the present value of the defined benefit obligation as of December 31, 2021 and 2020 are as follows:

Effect on the defined benefit obligation

Increase of 0.25% Decrease of 0.25%

December 31, 2021

178

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Discount rate	$	(2,023)	2,099
Future salary increases		2,066	(2,002)
December 31, 2020
Discount rate		(2,278)	2,367
Future salary increases		2,322	(2,247)

The sensitivity analysis above analyzes the effect of changes in a single assumption with other assumptions held constant. In practice, changes in many assumptions may be linked. The sensitivity analysis is consistent with the methodology used to calculate the net pension liability on the balance sheet.

The methodology and assumptions used in preparing the sensitivity analysis are the same as those used in the previous period.

2. Defined contribution plan

As to the defined contribution plan, the Consolidated Company shall contribute the retirement funds of employees to the individual accounts for labor retirement funds of the Bureau of Labor Insurance according to 6% of the monthly salaries of labors under the provisions of Labor Pension Act. Under this plan, after contributing fixed amount to the Bureau of Labor Insurance, the Consolidated Company will not assume the legal or constructive obligations of paying extra amount.

The pension expense under the defined contribution retirement funds of the Consolidated Company for year 2021 and 2020 were NT$15,071 thousand and NT$12,635 thousand respectively, which have been contributed to the Bureau of Labor Insurance.

In accordance with the pension insurance system established by the government of the People’s Republic of China, the subsidiaries in Mainland China make monthly contributions to employees’ pension insurance based on a certain percentage of their salaries and wages. The monthly pension plan is administered and arranged by the government, and the above-mentioned company has no further obligation other than to make monthly contributions. The related pension expense for 2021 and 2020 were NT$279,510 thousand and NT$137,267 thousand, respectively.

(20) Income tax

1. The details of the income tax expense of the Consolidated Company are as follows:

Income tax expense for the period Current income tax Tax on unappropriated retained earnings Prior period current income tax adjustment Deferred income tax expense Other deferred income tax expense (benefit) Recognition of unrecognized tax losses in prior periods Income tax expense	2021 $ 1,084,673 57,107 (102,213)	2020 824,517 23,276 (47,498)
	1,039,567	800,295
	(18,499) 99	34,118 -
	$ 1,021,167	834,413

A breakdown of the Consolidated Company's income tax expense (benefit) recognized under other comprehensive income for year 2021 and 2020 is as follows:

comprehensive income for year 2021 and 2020 is as follows:
Components of other comprehensive income that will not be reclassified to profit or loss: Remeasurements of defined benefit plan Components of other comprehensive income that will be reclassified to profit or loss: Exchange differences on translation	2021 $ 770	2020 (1,520)
	$ (39)	(1,733)

A reconciliation of Income tax expense (benefit) to net profit before tax for the Consolidated Company for fiscal years 2021 and 2020 is as follows:

Net profit before tax Income tax based on domestic tax rate Adjustments based on local tax laws Adjustments to current income taxes for prior periods Additional tax levied on unappropriated retained earnings Basic income tax	2021 $ 4,540,198	2020 3,670,002
	1,524,040 (459,463) (102,114) 57,107 1,597	1,108,837 (250,202) (47,498) 23,276 -

179

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Total $ 1,021,167 Deferred tax assets and liabilities (1) Unrecognized deferred tax assets The items not recognized as deferred tax assets of the Consolidated Company ar Dec. 31, 2021 Tax losses $ 15,454	$ 1,021,167	834,413
		e as follows: Dec. 31, 2020 15,429

In accordance with the Income Tax Act, losses for the previous ten years may be deducted from net income before income tax is assessed. These items are not recognized as deferred tax assets because it is not probable that the Consolidated Company will have sufficient taxable income in the future to utilize the temporary differences.

In accordance with the Income Tax Act, Ememe Robot Co., Ltd. is allowed to deduct the net income of the year from the loss for the previous ten years as approved by the tax authorities for income tax purposes. As of December 31, 2021, the Consolidated Company has not recognized tax losses as deferred tax assets, which are deducted as follows: Ememe Robot Co., Ltd.:

Year of loss 2011 (Approved) 2012 (Approved) 2013 (Approved) 2014 (Approved) 2015 (Approved) 2016 (Approved) 2017 (Approved) 2018 (Approved) 2019 (Approved) 2020 (Declared) 2021 (Estimated)	Losses not yet deducted $ 9,714 14,184 14,550 6,246 8,951 10,166 6,828 3,237 2,609 629 159 $ 77,273	Last year to be deducted
		2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

(2) Deferred tax assets recognized

Inventory valuation and obsolescence losses Undistributed pension costs Loss on decline in value of fixed assets and idle assets Refund liabilities Unrealized exchange loss Estimated payables Remeasurement of defined benefit plans Bad debt expense Exchange differences on translation Employee benefits Deferred tax assets (3)Deferred income tax liabilities recognized Unrealized exchange gain Investment income recognized by the equity method Gain recognized in bargain purchase transaction Other Deferred income tax liabilities	Dec. 31, 2021 $ 38,999 441 44 43,860 - 56,831 8,986 126 1,772 408	Dec. 31, 2020 29,513 478 44 43,368 1,049 39,927 9,757 663 1,733 612 127,144 Dec. 31, 2020 1,176 23,789 2,089 -
	$ 151,467
	Dec. 31, 2021
	$ 8,297 24,019 1,567 23 $ 33,906
		27,054

2. Income tax assessment

The Company's income tax returns have been assessed by the tax authorities through fiscal 2018. The income tax of domestic subsidiaries Jiayu Investment Co., Ltd., Ememe Robot Co., Ltd., Compertum Microsystems Inc., Lintes Technology Co., Ltd. and Genie Precision Machine Co., Ltd. has

180

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

been assessed through fiscal 2019.

(21) Capital and other equity

As of December 31, 2021 and 2020, the total authorized capital stock of the Company were all NT$1,550,000 thousand with a par value of $10 per share, and the actual amount issued were NT$1,059,779 and NT$1,034,779 thousand respectively.

In fiscal 2021, the Company issued 117 thousand shares at par value for a total amount of $1,167 thousand due to the exercise of conversion rights by holders of convertible bonds. The number of shares issued has not yet been completed due to the related legal registration procedures and is therefore included in the certificate of exchange of bonds for stock dividends of $1,167 thousand.

On May 13, 2021, the Board of Directors resolved to issue 2,500 thousand shares at a par value of $10 per share at an issue price of $432 per share through a cash capital increase, with September 17, 2021 as the base date. The capital increase was approved by the Financial Supervisory Commission and the legal registration was completed on October 8, 2021.

1. Capital reserves

The components of the Company’s capital reserve are as follows::

Premium of issued shares Convertible bond conversion premium Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options Convertible bond stock options	Dec. 31, 2021 $ 4,628,739 72,562 370,540 40,330 171,527		Dec. 31, 2020 3,577,768 - 365,080 15,399 - 3,958,247
	$ 5,283,698

In accordance with the Companies Act, capital reserves are required to cover losses first before new shares or cash can be issued in proportion to the shareholders’ original shares. Realized capital reserves referred to in the preceding paragraph include premiums from the issuance of shares in excess of par value and proceeds from gifts received. In accordance with the Regulations Governing the Issuer’s Offerings and Issuance of Marketable Securities, the aggregate amount of capital reserves that may be capitalized each year shall not exceed 10% of the paid-in capital.

1. Retained earnings

In accordance with the Company’s Articles of Incorporation, the Company shall, after the final settlement of each year’s earnings, first complete tax contributions, make up for prior years’ deficits and set aside 10% as legal reserve, except when the legal reserve has reached the level of total capital; the Company is required by law to set aside or reverse special reserve. In the case of unappropriated retained earnings for the same period, the Board of Directors shall propose a proposal for the distribution of earnings to the shareholders for resolution, and the dividend to be distributed shall not be less than 20% of the net profit for the year after taxation, after deducting the net income provided for by law.

The Company will take into account the environment and growth of the Company and the distribution of earnings should take into account the Company’s future capital expenditure budget and capital requirements, and pay cash dividends of not less than 10% of the dividends distributed in the current year. (1) Legal reserve

If the Company has no deficit, it may, by resolution of the shareholders in general meeting, issue new shares or cash out of the legal reserve to the extent that such reserve exceeds 25% of the paid-in capital.

(2) Special reserve

When the Company distributes distributable earnings, a special reserve of the same amount is provided from current income and prior undistributed earnings for the net decrease in other shareholders’ equity that occurred during the year. When the 2019 earnings were appropriated in fiscal 2020, the appropriated special reserves were added to the current period’s earnings and the prior period’s unappropriated retained earnings, and when the 2020 earnings were appropriated in fiscal 2021, the appropriated special reserves were added to the current period’s profit after tax and the amount of items other than the current period’s profit after tax that were included in the current period’s unappropriated retained earnings and the prior period’s unappropriated retained earnings. If there is a decrease in shareholders’ equity accumulated in prior years, the same amount of special reserve from prior years’ undistributed earnings shall not be distributed. If there is a subsequent reversal in the number of other decreases in shareholders’ equity, the reversal may be distributed in the form of a surplus.

(3) Earnings distribution

The appropriation of the Company’s 2020 earnings reached the legal resolution threshold through electronic voting on June 19, 2021, and was resolved at the shareholders’ meeting held on July 26, 2021.

181

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

On June 19, 2020, the shareholders’ meeting resolved the appropriation of the 2019 earnings, and the dividends to be distributed to owners are as follows:

Distributed to the holders of ordinary shares: Cash		2020 Payout ratio (NT$) Amount 13.30 1,376,256	2020 Payout ratio (NT$) Amount 13.30 1,376,256		2019 Payout ratio (NT$) Amount 10.50 1,086,518	2019 Payout ratio (NT$) Amount 10.50 1,086,518
	$	Payout ratio (NT$) 13.30			Payout ratio (NT$) 10.50

On March 21, 2022, the Company’s board of directors proposed the following 2020 earnings distribution:

Distributed to the holders of ordinary shares: Cash $		2021 Payout ratio (NT$) Amount 16.00 1,695,646	2021 Payout ratio (NT$) Amount 16.00 1,695,646
		Payout ratio (NT$) 16.00

Information on the distribution of earnings as proposed by the Board of Directors and resolved by the Shareholders’ Meeting is available on the “Public Information Observation Post System”. 3. Other equity

Balance on January 1, 2021 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on December 31, 2021 Balance on January 1, 2020 Exchange differences arising from the translation of the net assets of foreign operations Unrealized gains from financial assets measured at FVTOCI Disposal of equity instruments measured at FVTOCI Balance on December 31, 2020	Exchange differences on translation of foreign operations $ (586,953) (82,102) -	Unrealized gain (loss) on financial assets measured at FVTOCI (8,019) - (5,259)	Total (594,972) (82,102) (5,259)
	$ (669,055)	(13,278)	(682,333)
	$ (631,970) 45,017 - -	(18,562) - 403 10,140	(650,532) 45,017 403 10,140
	$ (586,953)	(8,019)	(594,972)

(22) Share-based payment

The Consolidated Company has the following share-based payment transactions:

Date of grant Number of grants Granted to Vesting conditions Fair value at the date of grant	Cash capital increase reserved for employee stock options TheCompany Lerain Technology Genie Precision	Cash capital increase reserved for employee stock options TheCompany Lerain Technology Genie Precision
	TheCompany Lerain Technology
	2021.08.23 2021.08.19 2021.03.02 2020.12.28 233 thousand shares 1,119 thousand shares 1,268 thousand shares 221 thousand shares Current employees of the Company Current employees of the subsidiary Current employees of the subsidiary Current employees of the subsidiary Immediate vesting Immediate vesting Immediate vesting Immediate vesting $107.00 $0.13 $0.00 $0.00	2020.07.23 1,500 thousand shares Current employees of the subsidiary Immediate vesting $15.87

The Company’s cost of employee compensation based on the shares generated from the cash capital increase retained for employee stock options was $24,931 thousand recognized in fiscal 2021.

182

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The Subsidiary Lerain Technology Co., Ltd.’s cost of employee compensation based on the shares generated from the cash capital increase retained for employee stock options was $146 thousand and $0 thousand recognized in fiscal 2021 and 2020, respectively.

The Subsidiary Genie Precision Machine Co., Ltd.’s cost of employee compensation based on the shares generated from the cash capital increase retained for employee stock options was $7,795 thousand recognized in fiscal 2020.

(23) Earnings per share

The calculation of basic earnings per share and diluted earnings per share of the Consolidated Company is as follows:

Basic earnings per share: Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Basic earnings per share Diluted earnings per share: Net profit attributable to the Company in the year Dilutive potential ordinary shares: Convertible bond Net income attributable to equity holders of the Company’s common stock (adjusted for the effect of dilutive potential common stock) Weighted average shares outstanding (1,000 shares) Dilutive potential ordinary shares: Bonuses for employees Convertible bond Weighted average common shares outstanding (adjusted for the effect of dilutive potential common stock) Diluted earnings per share	2021	2020 2,732,361 103,478 26.41 2,732,361 - 2,732,361 103,478 272 - 103,750 26.34
	$ 3,472,201
	104,204
	$ 33.32
	$ 3,472,201 664
	$ 3,472,865
	104,204 204 1,820
	106,228
	$ 32.69

(24) Revenue from contracts with customers

1. Please refer to Note XIV (3) and (4) for the disclosure of disaggregation of revenue for the major products and major regional markets.

2. Balance of contract

Contract liabilities	Dec. 31, 2021 $ 97,494	Dec. 31, 2020 91,659

The beginning balances of contract liabilities as of January 1, 2021 and 2020 were recognized as income of NT$80,527,000 dollars and NT$18,642,000 dollars respectively. (25) Non-operating revenue/expense

1. Interest income

The breakdown of interest income of the Consolidated Company is as follows:

Interest on bank deposits	2021 $ 13,994	2020 28,789

2. Other income

The details of other income of the Consolidated Company are as follows:

Dividend income Income from molding Income from compensation Income from rentals Income from the sales of R&D products Income from subsidies Others	2021 $ 6,119 73,063 12,938 35,964 - 103,327 93,515 $ 324,926	2020 1,341 52,604 12,579 37,708 4,516 39,806 65,713 214,267

3. Other gains and losses

The details of other gains and losses of the Consolidated Company are as follows:

183

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

2021 Foreign exchange gain (loss) $ (148,338) Net profit or loss from financial assets (liabilities) measured at FVTPL: Derivatives: Forward foreign exchange contracts 11,382 Metal commodity swap contracts 21,077 Embedded derivative 2,700 Non-derivatives (9,364) Loss from the disposal of property, plant and equipment (3,728) Lease modification interest 2,472 Other (4,849) Total $ (128,648)	2021	2020 (308,515) 11,644 4,346 - 39,063 2,446 - (25,453)
	$ (128,648)	(276,469)

4. Financial costs

The details of the financial costs of the Consolidated Company are as follows:

Interest expense Bank loans Lease liabilities Conversion of corporate bonds	2021	2020 8,920 9,689 -
	$ 5,950 18,824 3,530
	$ 28,304	18,609

(26) Compensation to employees, directors, and supervisors

In accordance with the Company’s Articles of Incorporation, no less than 3% of the Company’s annual profits shall be appropriated to the Compensation of Employees and no more than 3% to the Compensation of Directors and Supervisors; however, if the Company has accumulated losses, it shall retain the amount of compensation in advance and appropriate the Compensation of Employees and Supervisors in proportion to the aforementioned. The former Compensation of employees to whom stock or cash is issued may include employees of a subordinate company who meet certain criteria.

The estimated amount of compensation of employees for the years ended December 31, 2021 and 2020 was $122,062,000 dollars and $97,235,000 dollars respectively, and the estimated amount of compensation to directors and supervisors was $4,480,000 dollars. The Company’s net profit before tax for the period is estimated by multiplying the amount of the Company’s net profit before issuing the compensation of employees and directors and supervisors by the proportion of the Company’s compensation distribution to employees and directors and supervisors as provided in the Company’s Articles of Incorporation and is reported as operating costs or expenses for that period. If there is a difference between the actual distribution amount and the estimated amount for the following year, the change in accounting estimate is adjusted and the difference is recognized in profit or loss for the following year. In the event that the Board of Directors resolves to grant a compensation of employees by way of stock, the number of shares of stock-based compensation is calculated based on the closing price of the common stock on the day before the Board of Directors’ resolution.

There was no difference between the amount resolved by the board of directors for employees’ and directors’ and supervisors’ compensation in 2020 and the amount estimated in the consolidated financial statements for year 2020. There was no difference between the amount resolved by the board of directors for employees’ and directors’ and supervisors’ compensation in 2021 and the amount estimated in the consolidated financial statements for the year 2021. The related information is available on the Market Observation Post System (MOPS).

(27) Information on financial instruments and fair value

1. Credit risk

(1) Credit risk exposure

The carrying amount of a financial asset represents the maximum amount of credit risk. The maximum amount of credit risk exposure was $12,617,236,000 dollars and $10,286,606,000 dollars as of December 31, 2021 and 2020 respectively.

(2) Credit risk concentration risk

In order to reduce the credit risk of accounts receivable, the Consolidated Company continually evaluates the financial position of its customers and adjusts the terms of

184

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

transactions between them if necessary. As of December 31, 2021 and 2020, the Consolidated Company had each 4 different customers with accounts receivable balances exceeding 5% of total accounts receivable for a single customer. The Consolidated Company periodically evaluates the probability of recovery of accounts receivable and presents Provisions, and the total loss is always within management’s expectations.

(3) Impairment loss

The Consolidated Company uses a simplified method of estimating expected credit losses for all of its notes and accounts receivable, which is to measure expected credit losses over the life of the notes and accounts receivable, and for this purpose, the notes and accounts receivable are grouped by common credit risk characteristics that represent the ability of customers to pay all amounts due under contractual terms and are included in forward-looking information. The expected credit losses on the Consolidated Company’s notes and accounts receivable are analyzed as follows:

Not past due 1-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due More than 271 days past due Not past due 1-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due More than 271 days past due		Dec. 31, 2021	Expected credit loss in the duration of provision 882 504 7,562 3,935 184 4,390
	Book value of notes and accounts receivable	Weighted average expected credit loss rate 0.01% 0.10% 15.90% 31.12% 45.89% 100.00% Dec. 31, 2020
	$ 8,268,615 481,878 47,553 12,646 401 4,390
	$ 8,815,483		17,457
			Expected credit loss in the duration of provision 750 3,690 572 489 1 6,547
	Book value of notes and accounts receivable	Weighted average expected credit loss rate 0.01% 0.77% 10.04% 27.61% 50.00% 100.00%
	$ 6,413,813 479,202 5,698 1,771 2 6,547
	$ 6,907,033		12,049

The changes in the provisions for notes and accounts receivable of the Consolidated Company are as follows:

Opening balance Acquired in business combination Recognized impairment loss (gain on reversal) Write-offs for the period Foreign currency translation gains and losses Closing balance	2021
	$ 17,457 12,049

185

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

2. Liquidity risk

The contracts of financial liabilities are sorted by their maturity dates as follows. The estimated interests are included, but the effect of net value agreement is excluded.

December 31, 2021 Non-derivative financial liabilities Short-term loans Bonds payable Long-term loans(including long-term loans – current portion) Notes payable Accounts payable Other payables Lease liabilities December 31, 2020 Non-derivative financial liabilities: Long-term loans(including long-term loans – current portion) Notes payable Accounts payable Other payables Lease liabilities	Book value $ 1,142,178 911,927 44,405 16,402 2,613,359 1,998,938 506,589	Cash flow from the contract 1,145,255 936,100 47,515 16,402 2,613,359 1,998,938 559,221	Within 6 months 870,126 - 2,436 16,402 2,613,359 1,998,938 164,713 5,665,974 2,303 3,574 2,501,155 1,206,695 49,038 3,762,765	6 12 months 275,129 - 12,857 - - - 75,695	1-2years - - 2,458 - - - 105,309	2-5years - 936,100 7,216 - - - 190,028	More than 5 years - - 22,548 - - - 23,476 46,024 - - - - - -
	$ 7,233,798	7,316,790		363,681	6,755,741	6,844,435
	$ 23,996 3,574 2,501,155 1,206,695 176,250	24,680 3,574 2,501,155 1,206,695 193,213		3,318 - - - 30,274	6,973 - - - 43,091	12,086 - - - 70,810
	$ 3,911,670	3,929,317		33,592	50,064	82,896

The Consolidated Company does not anticipate that the cash flows analyzed at maturity date will alter significantly or that the actual amounts will vary significantly. 3. Market risk—exchange rate risk

• (1) Exposure to exchange rate risk

The Consolidated Company’s financial assets and liabilities exposed to significant foreign currency exchange rate risk are as follows:

	Financial assets Currency USD RMB HKD JPY EURO INR Financial liabilities Currency USD RMB JPY EURO Financial assets Currency USD RMB HKD		Dec. 31, 2021
		$ $
		$	Foreign currency (Note) 415,424 177,119 7,601

186

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

	JPY 134,465 0.2763 37,153 EURO 1,105 35.0200 38,696 INR 4 0.4791 2 VND 3,662,009 0.0012 4,394 Financial liabilities Currency USD $ 222,790 28.4800 6,487,452 RMB 71 4.3648 312 HKD 2,778 3.6730 10,202 JPY 75,180 0.2763 20,772 EURO 33 35.0200 1,157

Note: The foreign currencies denominated in the non-functional currencies of the consolidated entities include items that have been eliminated in the consolidated financial statements for inter-group transactions.

Due to the variety of functional currencies of the Consolidated Company, information on exchange gains and losses on monetary items is presented on a consolidated basis. Foreign currency exchange gains and losses (including realized and unrealized) amounted to a loss of $148,338 thousand and a loss of $308,515 thousand in fiscal 2021 and 2020, respectively.

• (2) Sensitivity analysis

The Consolidated Company's exchange rate risk arises mainly from cash and cash equivalents denominated in foreign currencies, financial assets at FVTPL, accounts receivable and other receivables, other financial assets, short-term loans, accounts payable and other payables, which generate foreign currency exchange gains or losses upon translation. As of December 31, 2021 and 2020, when NTD depreciates or appreciates by 1% against the foreign currencies held by the Consolidated Company, with all other factors held constant, net income after tax would increase or decrease by $62,134 thousand and $49,542 thousand for year 2021 and 2020, respectively. The same basis was used for the analysis of both periods.

4. Market risk—changes in interest rates

The interest rate risk of the Consolidated Company mainly comes from the bank deposit and short-term loan of floating rate, so the interest rate change will cause the effective interest rate of bank deposit and short-term loan to change accordingly, and the future cash flow will fluctuate.

The following sensitivity analysis is based on the risk of interest rate shocks reported by financial instruments on the date of coverage. For floating rate liabilities, the analysis is based on the assumption that the reported amount of daily outstanding liabilities is current throughout the year. The rate of change used by the Consolidated Company in reporting interest rates to the main management is 1% up or down, which represents the management’s assessment of the reasonable range of possible interest rate changes.

The Consolidated Company’ financial assets with variable interest rates as of December 31, 2021 and 2020 were NT$2,472,303 thousand and NT$2,262,409 thousand, respectively, and its financial liabilities were NT$14,805 thousand and NT$23,996 thousand, respectively. If interest rates had increased or decreased by 1%, the Consolidated Company’ net income would have increased or decreased by NT$19,660 thousand and NT$17,907 thousand for year 2021 and 2020, respectively, with all other variables held constant.

1. Market risk—fair value

2. (1) Fair value and carrying amount

The management of the Consolidated Company believes that non-derivative short-term financial instruments should be estimated at their fair value based on their book value on the balance sheet, and that their book value should be a reasonable basis for the estimated fair value because of the near expiry date of such commodities. This method is applied to cash and equivalent cash, notes receivable and payable, accounts receivable and payable, other receivables and payables, deposit margin and short-term borrowings.

In addition to the above financial instruments, the fair value and book value information of the remaining financial instruments and investment real estate of the Consolidated Company on the financial reporting date are as follows:

187

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Measured at fair value: Financial assets: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value Non-financial assets: Investment property	Dec. 31, 2021
	Book value $ 157,494 31,459 335,869

• (2) The evaluation techniques used to determine fair value are as follows

• A. When financial assets are quoted publicly in an active market, this market price is the fair value. When market prices are not available, estimates are made by reference to quoted counterparties or using valuation techniques. The estimates and assumptions used are consistent with the information used by market participants as estimates and assumptions in pricing financial instruments.

• B. The fair value of investment properties is based on the evaluations of independent evaluators with recognized professional qualifications and recent experience in the area and type of investment properties evaluated.

• (3) Fair value hierarchy

• The following table analyzes the fair value hierarchy of financial instruments and

• investment property by valuation. Each fair value hierarchy is defined as follows: A. Level 1: Publicly quoted prices (unadjusted) in an active market for identical assets or liabilities.

• B. Level 2: Input parameters for an asset or liability are observable either directly (i.e., prices) or indirectly (i.e., derived from prices), except for publicly quoted prices included in Level 1.

• C. Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable parameters).

December 31, 2021 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property December 31, 2020 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property	Level 1 $ 91,737 20,503	Level 2 - -	Level 3 65,757 10,956	Total 157,494 31,459 188,953 466,940 122,960 22,136 145,096 467,325
	$ 112,240	-	76,713
	$ -	-	466,940
	$ 116,780 20,120	- -	6,180 2,016
	$ 136,900	-	8,196
	$ -	-	467,325

• (4) Transfer between the Level 1 and the Level 2

The Consolidated Company does not have any transfers between 2021 and 2020. (5) Statement of changes in financial assets (liabilities) classified as Level 3 at fair value

Unit: NT$1,000

188

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Name Financial assets measured at FVTPL Financial assets measured at FVTOCI Name Financial assets measured at FVTPL Financial assets measured at FVTOCI							2021								Closing balance 65,757 10,956
	$	Opening balance 6,180 2,016		Total profit or loss Recognized in profit or loss Recognized in other comprehensive income 2,923 - - (5,460) 2,923 (5,460)			Incr	ea	s	e ransferred to level 3 - -			Decrease Sales, disposal or settlement (6,410) -
				Recognized in profit or loss 2,923 -			Issuance or purchase 63,064 14,400		T
					income - (5,460)
	$	8,196		2,923	(5,460)		77,464			-			(6,410)		76,713
							2020								Closing balance 6,180 2,016
	$	Opening balance 219,103 6,438		Profit	or loss Recognized in other comprehensive		Incr	ea	s	e ransferred to level 3 - -			Decrease Sales, disposal or settlement (219,103) (4,860)
				Recognized in profit or loss 6,180 -			Issuance or purchase - -		T
					income - 438
	$	225,541		6,180	438		-			-			(223,963)		8,196

The above included gains and losses are reported in “other gains and losses” and “unrealized valuation gains (losses) on financial assets at FVTOCI”, which relate to assets still held as of December 31, 2021 and 2020 as follows:

Total gain or loss Recognized in profit (losses) (reported in “other gains and losses”) Recognized in other comprehensive income (reported in “unrealized valuation gains (losses) on financial assets at FVTOCI”)	2021 $ 2,750 (5,460)	2020
		6,180 85

(6) Quantitative information on fair value measurements of significant unobservable inputs (Level 3)

The Consolidated Company's financial assets measured at FVTPL classified as Level 3 fair value were NT$62,387 thousand and NT$6,180 thousand as of December 31, 2021 and 2020, respectively. Quantitative information is not disclosed because there is no active market for quoted prices but reference to counter-parties' quotes, and the relationship between significant non-observable inputs and fair values cannot be fully obtained in practice. The remaining quantitative information of significant non-observable inputs measured at fair value for Level 3 is listed below:

Item Financial assets measured at FVTPL - Embedded derivatives - right of redemption Financial assets measured at FVTOCI - investment in equity instruments with no active market	Valuation techniques Binary tree method for pricing convertible bond Comparable company analysis	Significant unobservable inputs ‧Volatility on Dec. 31, 2021: 38.95% ‧Net market value multiplier on Dec. 31, 2021: 2.05 ‧Lack of marketability discount on Dec. 31, 2021: 15.80%	Relationship between significant unobservable inputs and fair value ‧The higher the volatility, the higher the fair value ‧The higher the multiplier, the higher the fair value ‧The higher the discount for lack of marketability, the lower the fair value

" Net asset value ‧Net asset value

‧The fair value is positively

189

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

approach correlated

• (7) Valuation process for fair value classified in Level 3

• The Consolidated Company uses unobservable inputs for its fair value

• measurements and classifies its fair value in Level 3. The source of the input value for this level is the price provided by reference to counterparty quotations or market comparable companies’ net market value multipliers, etc., and the relevant quotations and valuation information are appropriately maintained. The results are subsequently reviewed to ensure consistency with the valuation sources and the reasonableness of the valuation results.

• (8) Sensitivity analysis of fair value to reasonably possible alternative assumptions for Level 3 fair value measurements

The Consolidated Company’s fair value measurements of financial instruments are reasonable, but the use of different valuation models or valuation parameters may result in different valuation results. For financial instruments classified in Level 3, if the valuation parameters are changed, the impact on the profit or loss or other comprehensive income for the period is as follows:

September 31, 2021 Financial assets measured at FVTPL Embedded derivatives - right of redemption Financial assets measured at FVTOCI Investments in equity instruments with no active market	Input value	Upward or downward changes	Fair value changes reflected in profit or loss for theperiod	Fair value changes reflected in profit or loss for theperiod	Fair value changes reflected in other comprehensive income	Fair value changes reflected in other comprehensive income
			Favorable changes	Unfavorab le changes	Favorable changes	Unfavorab le changes
	Volatility Stock price Net market value multiplier Lack of marketability discount	5% 10% 8% 8%	$ 2,527 1,030 - -	(936) (1,030) - -	- - 136 136	- - (137) (137)

Favorable and unfavorable changes in fair value represent fluctuations in fair value, which are calculated using valuation techniques based on various degrees of unobservable input parameters. If the fair value of a financial instrument is affected by more than one input, the above table reflects only the effect of changes in a single input and does not take into account the correlation and variability among the inputs.

• (28) Financial risk management

• The Consolidated Company is exposed to the following risks from the engagement of financial instruments:

(1) Credit risk

• (2) Liquidity risk

(3) Market risk

This note presents the Consolidated Company’s risk information for each of these risks and the Consolidated Company’s objectives, policies and procedures for measuring and managing risk. For further quantitative disclosures, please refer to the respective notes to the consolidated financial statements.

2. Risk management structure

The Chairman has the sole responsibility for establishing and overseeing the Consolidated Company’s risk management structure and reports regularly to the Board on its operations.

190

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

The Consolidated Company’s risk management policy is designed to identify and analyze the risks faced by the Consolidated Company, to set appropriate risk limits and controls, and to monitor compliance with the risks and risk limits. The Consolidated Company develops a disciplined and constructive control environment through training, management guidelines and operating procedures to enable all employees to understand their roles and responsibilities.

The Board of Directors of the Consolidated Company oversees how management monitors compliance with the Consolidated Company’s risk management policies and procedures and reviews the appropriateness of the Consolidated Company’s risk management framework in relation to the risks it is exposed to. Internal auditors assist the Consolidated Company’s Board of Directors in its oversight role. These personnel conduct regular and exceptional reviews of risk management controls and procedures and report the results of these reviews to the Board of Directors.

3. Credit risk

Credit risk is the risk of financial loss arising from the failure of the Consolidated Company’s customers or counterparties to fulfill their contractual obligations, mainly from the Consolidated Company’s accounts receivable from customers and investments in securities.

(1) Accounts receivable and other receivables

The Consolidated Company’s credit risk exposures are primarily depended on each customer’s individual circumstances. However, management also considers statistical information about the Consolidated Company’s customer base, including the risk of default in the customer’s industry and country, as these factors may affect credit risk. Approximately 76% and 80% of the Consolidated Company’s revenue for 2021 and 2020, respectively, were derived from sales to customers in Mainland China, which resulted in a significant concentration of regional credit risk.

The Consolidated Company has established a credit policy whereby the Consolidated Company is required to analyze the credit rating of each new customer individually before granting standard payment and delivery terms. Credit sales limits are established on an individual customer basis and are reviewed periodically; customers who do not meet the Group’s benchmark credit rating may only transact business with the Consolidated Company on a pre-collection basis.

In monitoring customers’ credit risk, customers are grouped according to their credit characteristics, including whether they are individuals or legal entities, age of accounts, maturity dates and pre-existing financial difficulties. The Consolidated Company maintains a Provisions account to reflect estimates of losses on accounts receivable and other receivables.

(2) Use of funds

The Consolidated Company’s investments in equity securities are placed through a centralized trading market and therefore have no significant credit transaction risk.

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and reported to the Chairman of the Board of Directors by the Consolidated Company’s finance department. Since the Consolidated Company’s counterparties are creditworthy banks and financial institutions with investment grade or above, there are no significant performance concerns and therefore no significant credit risk.

4. Liquidity risk

Liquidity risk is the risk that the Consolidated Company will not be able to deliver cash or other financial assets to settle its financial liabilities and will not be able to meet its related obligations. The Consolidated Company’s approach to manage liquidity risk is to ensure that the Consolidated Company has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances and that there is no risk of unacceptable loss or damage to the Consolidated Company’s reputation. In addition, the Company has entered into unused borrowing lines totaling $2,263,801,000 as of December 31, 2021 to cover unanticipated payments.

5. Market risk

Market risk is the risk that changes in market prices, such as changes in exchange rates, interest rates, and prices of equity instruments, will affect the Consolidated Company’s revenue or the value of financial instruments held by the Consolidated Company. The objective of market risk management is to manage the exposure to market

191

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

risk to an acceptable level and to optimize investment returns.

The Consolidated Company engages in derivative transactions in order to manage market risk. All transactions are executed in accordance with the guidelines of the Board of Directors.

(1) Exchange rate risk

The Consolidated Company uses derivative transactions to hedge exchange rate risk due to its exposure to exchange rate risk arising from sales and purchase transactions that are not denominated in each Group Enterprise’s functional currency. Gains or losses on foreign currency assets and liabilities arising from changes in exchange rates are largely offset against natural hedges. Derivative transactions can help the Company reduce, but still not completely eliminate, the impact of changes in foreign currency exchange rates.

The Consolidated Company periodically reviews individual foreign currency assets and liabilities for exposures and hedges against such exposures.

(2) Interest rate risk

The Consolidated Company’s interest rate risk arises primarily from variable rate bank deposits and short-term loans, and changes in interest rates will cause future cash flows to fluctuate as the effective interest rates on bank deposits and short-term loans change.

(3) Equity instrument price risk

If the price of equity securities changes at the reporting date (the same basis is used for both periods of analysis and other changes are assumed to be constant), the effect on the consolidated profit and loss items would be as follows:

Price of securities on reporting date Up by 1% Down by 1%
	Other comprehensive income after tax $ 315					Other comprehensi ve income after tax 221
	$ (315)			(917)			(221)	(1,168)

(29) Capital management

It is the Board’s policy to maintain a sound capital base to maintain the confidence of investors, creditors and the market and to support the development of future operations. Capital consists of the Consolidated Company’s share capital, capital surplus and retained earnings. The Board of Directors controls the rate of return on capital and also controls the level of dividends on ordinary shares.

In order to maintain or adjust its capital structure, the Consolidated Company may adjust dividends paid to shareholders, reduce capital to refund shareholders, issue new shares or sell assets to settle liabilities.

The Consolidated Company controls its capital on a debt-to-capital ratio basis. The ratio is calculated by dividing net debt by total capital. Net debt is total liabilities less cash and cash equivalents as shown on the balance sheet. Total capital represents all components of equity (i.e., equity, capital surplus, retained earnings and other equity) plus net debt. The debt-to-capital ratio at the reporting date is as follows:

debt-to-capital ratio at the reporting date is as follows:
Total liabilities Less: Cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	Dec. 31, 2021 $ 8,364,687 (3,303,062)			Dec. 31, 2020 4,803,336 (2,949,412) 1,853,924 14,479,559 11.35%
	$ 5,061,625
	$ 18,054,704
		21.90%

(30) Investment and fund-raising activities for non-cash transactions

Please refer to Notes VI (8) and VI (15) for information on the Consolidated Company’s non-cash trading investments and fundraising activities for Right-of-use assets acquired under leases in 2021 and 2020.

The reconciliation of the Consolidated Company’s liabilities from fundraising activities for the years ended December 31, 2021 and 2020 was as follows:

Non-cash changes

Jan. 1, 2021 Cash flow Other Changes in Changes in Dec. 31,

192

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Short-term loans Bonds payable Long-term loans (including long-term loans – current portion) Lease liabilities Total liabilities from financing activities	$ - 1,147,192 - - 1,152,983 (241,056) 23,996 20,409 - 176,250 (374,960) 705,622	exchange rate	fair value	2021
			- - - -	1,142,178 911,927 44,405 506,589
		(5,014) - - (323)
	$ 200,246 1,945,624 464,566	(5,337)	-	2,605,099

Short-term loans Long-term loans (including long-term loans – current portion) Lease liabilities Total liabilities from financing activities	Jan. 1, 2020 Cash flow	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2020
	$ 29,980 (67,145) - (105,548) 155,411 (116,630)	36,680 485 - - 129,544 - - 23,996 135,013 2,456 - 176,250
	$ 185,391 (289,323)	301,237 2,941 - 200,246

VII. Related Party Transactions

(1) Parent company and ultimate controller: The Company is the ultimate controller of the Consolidated Company and the Consolidated Company’s subsidiaries.

• (2) Names and relationships of related parties

The related parties that had transactions with the Company during the period covered by these consolidated financial statements are as follows:

Name of related parties Relationship with the Company De Chuang Investment Co., Ltd. Substantial related party Key management personnel Including the directors, supervisors, managers and their families and spouses

(3) Material transactions with the related parties

1. Lease

The Consolidated Company leases warehouses from major management personnel and enters into one-year lease contracts with a total value of $60,000,000 with reference to the neighboring warehouse rental quotes. The interest expenses of $1,000 and $1,000 were respectively recognized in 2021 and 2020, and the balance of Lease liabilities as of December 31, 2021 and 2020 were respectively $59,000 and $0.

1. Acquisition of equity in subsidiaries

Type/name of related party Major management He, Xiu-lan	Subject of transaction Lerain Technology Co., Ltd.	Number of shares 547,059	Acquisition price 2021 $ 5,471

3. Loans from related parties

The Consolidated Company's loans from related parties bear interest at 2% per annum on pledges of fixed deposits with financial institutions in the year in which each such related party appropriated funds, and were fully repaid as of December 31, 2021, with interest expense of $128 thousand recognized from January 1 to December 31, 2021. (4) Major management personnel transactions

Related compensation includes:

2021

2020

193

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Short-term employee benefits Post-employment benefits Share-based payment	$ 98,944 60,584 1,191 1,271 2,087 -
	$ 102,222 61,855

VIII. Pledged Assets

The carrying value of the assets pledged as collateral by the Consolidated Company was as follows:

Name of asset Property, plant and equipment	Dec. 31, 2021 $ 80,278		Dec. 31, 2020 66,669

IX. Significant Contingent Liabilities and Unrecognized Contractual Commitments

• (1) Significant unrecognized contractual commitments:

• The Consolidated Company had outstanding contracts for significant construction of

• plants amounting to approximately RMB150,683 thousand as of December 31, 2021.

• The Consolidated Company had outstanding contracts for the purchase of land use

• rights amounting to approximately VND70,227,346 thousand as of December 31, 2021. The Consolidated Company had outstanding information system related contracts

• amounting to approximately $10,969 thousand as of December 31, 2021.

• (2) The issuance of guarantee notes for bank loans, financing lines and derivative financial commodity transactions:

Dec. 31, 2021 Dec. 31, 2020 $ 2,268,620 1,570,240

Guaranteed notes

X. Significant Disaster Loss: None.

XI. Significant Post-Period Events: None.

194

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

XII. Others

(1) Employee benefits, depreciation, depletion, and amortization functions are summarized below:

below:
Function Nature	2021			2020
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salary expenses Labor insurance and health insurance expenses Pension expenses Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	4,215,950 513,460 3,000 - 221,901 1,061,293 1,815	1,456,287 124,617 12,903 6,425 123,735 462,545 49,682	5,672,237 638,077 15,903 6,425 345,636 1,523,838 51,497	2,437,836 293,851 2,346 - 230,646 809,329 3,390	1,131,903 93,414 11,219 5,934 113,636 375,469 23,681	3,569,739 387,265 13,565 5,934 344,282 1,184,798 27,071

(2) Seasonality of operations:

The Company’s operations are subject to seasonal fluctuations due to the downstream computer industry.

XIII. Disclosing Information

(1) Major transaction details

In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the Company should disclose the following information about major transactions for year 2021:

1. Capital lending to others:

Unit: NT$1,000/1,000 in foreign currency

No.	Lender	Borrower	Item	Related party	Max amount for the period	Closing balance	Actual amount	Interest rate	Nature of the lending (Note 1)	Transactio n amount	Purpose for lending	Allowance for bad debt	Collateral	Collateral	Lending limit for single party (Note 2)	Overall lending limit (Note 2)
													Name	Value
0	The Company	Lotes Guangzhou Co.,Ltd.	Internal transaction	Yes	219,365 (RMB50,000)	217,35 (RMB50,000)	5 -	5%	2	-	Working capital	-	None	-	3,372,496	6,744,992

• Note 1: The following are the descriptions of the funds lending.

• (1) Those who have business dealings.

• (2) When there is a need for short-term financing.

• Note 2: The amount of the Company’s financing to a single party shall not exceed 20% of the Company’s net worth.

• The total amount of funds lent by the Company to others shall not exceed 40% of the Company’s net worth.

2. Endorsement:

Unit: NT$/foreign currency 1,000

No.	Endorseme nt provider	Endorsee	Endorsee	Ceiling on amount of endorsement for an enterprise (Note 2)	Balance of the ceiling endorsement fee in the period	Ending balance of the endorsement fee	Amount actually used	Amount of endorsemen t backed by assets	Percentage of the accumulated amount of endorsement in the net value of current financial statement (%)	Ceiling on amount of endorsement (Note 2)	Endorsement made by parent company to subsidiary	Endorsement made by subsidiary to parent company	Endorseme nt made to any party in Mainland China
		Company Name	Relatio nship (Note 1)
0 0	The Company "	REKA Technology Co., Ltd. Lotes Guangzhou	2 2	3,372,496 3,372,496	311,800 501,300 (USD18,000)	311,800 498,240 (USD18,000)	- 274,032	- -	1.85% 2.95%	8,431,241 8,431,241	Y "	N "	N Y
		195

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

0 1 2 2	" Lotes Gu Lintes Technology Co., Ltd. "	Co., Ltd. Lerain Technology Co., Ltd. aREKA Technology Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Genie Precision Machine Co., Ltd.	2 1 2 2	3,372,496 1,348,251 846,831 846,831	100,000 85,605 (USD3,000) 114,140 (USD4,000) 126,600	100,000 83,040 (USD3,000 - 126,600	- ) - - 44,405	- - - -	0.59% 1.23% - 7.47%	8,431,241 3,370,628 1,693,662 1,693,662	" N " "	" " " "	N N Y N

Note 1: There are seven types of relationship between the Endorser and Endorsee, which can be marked:

(1) Companies with business dealings.

• (2) Companies in which the company directly and indirectly holds more than 50% of the voting rights.

• (3) Companies that hold more than 50% of the voting rights in the company, both directly and indirectly.

(4) The Company owns, directly and indirectly, more than 90 percent of the voting shares.

• (5) Company that is mutually insured under a contract between its peers or co-manufacturers based on the need to perform the work.

(6) Company in which all of the contributory shareholders have given their endorsement in proportion to their shareholding in the joint venture.

(7) Intercompany performance guarantees and guarantees for pre-sale contracts in accordance with the Consumer Protection Act.

• Note 2: (1) The amount of the Company’s guarantee for a single corporate endorsement shall not exceed 20% of the net worth of the Company.

• The aggregate amount of the Company’s guarantees under external endorsement shall not exceed 50% of the net worth of the Company.

• (2) The amount of Lotes Guanghou Co., Ltd’s guarantee for a single corporate endorsement is limited to not more than 20% of the net worth of the company.

The aggregate amount of Lotes Guanghou Co., Ltd’s external endorsement guarantees is limited to an amount not exceeding 50% of the Company’s net worth.

• (3) The amount of Lintes Technology Co., Ltd.’s guarantee for a single corporate endorsement is limited to not more than 50% of the net worth of the company.

The aggregate amount of Lintes Technology Co., Ltd.’s external endorsement guarantees is limited to an amount not exceeding 100% of the Company’s net worth.

1. Securities held at the end of fiscal period (excluding the equity of controlled by subsidiaries, affiliated companies, or joint company):

Unit: NT$ 1,000

Holding company	Category and name of security	Relationship with the issuer of the security	Accounting item	End of the period	End of the period	End of the period	End of the period	Maximum shareholding or capitalization in the period	Remark
				Shares	Book value	Shareholding ratio	Fair value
Lotes Co., Ltd. " Jiayu Investment Co., Ltd. " " " " " "	SteadyBeat Technology Corporation G-sau Co.,Ltd Grand-Tek Technology Co., Ltd. TAIDOC TECHNOLOGY CORP. LIAN HONG ART CO., LTD. Patec Precision Industry Co., Ltd. OTO PHOTONICS, INC. LUCEMITEK CO., LTD. RADINET COMMUNICATIO	None " " " " " " " "	Financial assets measured at FVTOCI - non-current " Financial assets measured at FVTPL - current " " " " " "	950,000 300,000 382,980 25,000 1,017,000 477,000 1,368,800 1,169,977 600,000	8,545 955 22,251 4,538 51,592 13,356 - - -	9.90 % 13.64 % 1.56 % 0.03 % 2.94 % 1.04 % 4.57 % 17.33 % 26.25 %	8,545 955 22,251 4,538 51,592 13,356 - - -	9.90% 14.29% 1.56% 0.03% 2.98% 1.04% 4.57% 17.33% 26.25%	Note Note Note

196

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

" Lintes Technology Co., Ltd.	NS INC. AICP Technology Corporation Chailease Holding Company Limited Class A Preferred Shares	" "	Financial assets measured at FVTOCI - current Financial assets measured at FVTOCI - non-current	400,000 202,000	1,456 20,503	5.33 % 0.13 %	1,456 20,503	5.33% 0.13%

Note: All of them were recognized in losses.

1. The cumulative purchase or sale of the same securities amounted to at least NT$300 million or 20% of the paid-in capital: None.

197

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

1. Acquisition of real property amounting to NT$300 million or 20% or more of the paid-in capital:

paid-in capital:	paid-in capital:	paid-in capital:
							Unit: NT$1,000
The company which acquired the property	Name of asset	Date of occurrence	Amount of transaction (Note 2)	Payment condition (Note 2)	Counterparty of transaction	Relation	If the counterparty is a related party, the information of its previous transfer shall be provided				Reference for pricing	Purpose of the acquisition and the condition of use	Other agreed matters
							Owner	Relationship with the **issuer **	Date of transfer	Amount
Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd. Lotes Viet Nam CO., Ltd. Lintes Technology Co., Ltd.	Plant (Note 1) “ Land use rights Lands and buildings in parcel number 1159, Jiankang Rd., Zhonghe Dist., New Taipei City	2017.10 ~ 2021.12 2019.10 ~ 2021.12 2021.01.11 2020.12.16	1,698,815 344,644 299,921 237,700	1,081,382 307,045 215,648 237,700	Chongqing Chuangyou Construction Group, etc. “ GREEN i-PARK CORPORATION Natural person	None " " "	- - - -	- - - -	- - - -	- - - -	Tendering “ Negotiation Appraisal report from an appraisal firm	Constructio n of self-use plant “ “ Office (Note 3)	None “ “

Note 1: Build the factory by own contracting committee.

Note 2: The conversions were made at the exchange rates prevailing on the balance sheet date.

Note 3: To be used as an office after the decoration is completed.

1. Disposal of real property amounting to NT$300 million or 20% or more of paid-in capital: None.

198

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

1. The amount of sales to or from related parties is at least $100 million or 20% of the paid-in capital:

Unit: NT$ 1,000

The company which purchases (sells) products	Name of transaction counterparty	Relationship	Transaction status	Transaction status	Transaction status	Transaction status	Situation and reason for the conditions of transaction to be different from the ordinary ones	Situation and reason for the conditions of transaction to be different from the ordinary ones	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Remark
			Purchases (sales)	Amount	Percentage in total goods purchased (sold)	Credit period	Unit price	Credit period	Balance	Percentage in the notes and accounts receivable (payable)
Xincheng Development Co., Ltd. " REKA Technology Co., Ltd. " " " " " Lotes Guangzhou Co., Ltd. " " " Lintes Technology (Suzhou) Co., Ltd. Lotes HengNan Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd.	The Company Lotes Suzhou Co., Ltd. The Company Lotes Guangzhou Co., Ltd. Lotes HengNan Co., Ltd. " Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Lotes Zhongshan Co., Ltd. Lintes Technology Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Guangzhou Leside Technology Co., Ltd. "	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company " " " " " " " " Subsidiary The surrogate parent company are the same parent company " " "	Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net expense from the goods purchased " Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net expense from the goods purchased " " " Net revenue from the goods sold " " Net expense from the goods purchased "	1,379,153 1,436,269 10,140,753 10,115,863 667,963 450,692 2,555,583 1,143,684 2,328,977 377,560 191,278 118,523 1,841,200 371,002 158,660 828,419 365,906	95.70 % 99.67 % 74.41 % 75.65 % 5.00 % 3.31 % 19.11 % 8.55 % 31.67 % 5.13 % 1.81 % 1.12 % 96.35 % 28.40 % 12.15 % 79.75 % 41.26 %	Settled in 90 days " " " " " " " " " " " " " " " "	- - - - - - - - - - - - - - - - -	No significant difference " " " " " " " " " " " " " " " "	383,959 (404,902) 1,060,674 (1,258,218) (76,311) 103,230 (392,990) 570,213 (760,781) (37,829) (36,443) (54,089) 342,051 147,002 75,925 (380,925) (144,442)	94.51% (99.41)% 30.04% (51.39)% (3.12)% 2.92% (16.05)% 16.15% (42.14)% (2.10)% (2.02)% (3.00)% 96.10% 36.51% 18.86% 80.22% (42.37)%

199

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

8. Amounts due from related parties amounting to at least NT$100 million or 20% of

paid-in capital:

paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:
					Unit: NT$1,000
Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivables from the related party	Turnover ratio	Past due receivables from the related party		Amounts due from related parties recovered after the period	Allowance for losses
					Amount	Handling
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " " " " Lotes Suzhou Co., Ltd. Good Hope Investments Limited Lotes Guangzhou Co., Ltd. " Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd. Guangzhou Leside Technology Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd.	The Company " Lotes Guangzhou Co., Ltd. Lotes Hengnan Co., Ltd. Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " Lotes Zhongshan Co., Ltd. REKA Technology Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lintes Technology Co.,Ltd.	Subsidiary “ The surrogate parent company are the same parent company “ “ “ “ Parent company The surrogate parent company is the same parent company “ The surrogate parent company is the same parent company “ “ “ Subsidiary	383,959 1,060,674 760,781 103,230 161,474 570,213 404,902 855,894 1,258,218 647,560 392,990 147,002 380,925 144,442 342,051	4.10 7.27 4.38 4.92 - 4.01 4.03 - 8.40 - 8.95 2.93 4.35 5.07 5.15	- - - - - - - - - - - - - - -		102,440 1,060,665 194,533 29,101 - - 105,428 - 1,045,129 - 304,480 34,353 79,486 31,809 342,051	- - - - - - - - - - - - - - -

1. Engagement in derivative transactions: Please refer to Note VI (2) and (27).

200

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

1. Business relationships and material transactions between parent and subsidiaries: Business relationships and significant intercompany transactions in 2021:

Unit: NT$ 1,000

No.	Name	Transaction with	Relationship	Transaction in 2021	Transaction in 2021	Transaction in 2021	Transaction in 2021
				Subject	Amount	Term	Operating revenue Accounting for total assets
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	The Company " " " " " " " " " " " " " " " " " " " " " " " " " " " Lotes Guangzhou Co., Ltd. " " " " " Lotes Guangzhou Co., Ltd. " " " " " " " " " " " " "	Ememe Robot Co., Ltd. Lintes Technology Co., Ltd. " " " " Jiayu Investment Co., Ltd. LOTES USA, INC. " LOTES EU GmbH Xincheng Development Co., Ltd. " " " " REKA Technology Co., Ltd. " " " " Lotes Suzhou Co., Ltd. Good News Medical Co., Ltd. Lotes Guangzhou Co., Ltd. Lerain Technology Co., Ltd. " " " Mikronpoint Co., Ltd. REKA Technology Co., Ltd. " " " " " Lotes Suzhou Co., Ltd. " " " " Lotes Hengnan Co., Ltd. " " " " " Zongka Technology (Shenzhen) Co., Ltd. " "	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Other receivables Other income Sales revenue Net expense from the goods purchased Accounts receivable Accounts payable Other income Administration expense Other payables Administration expense Sales revenue Net expense from the goods purchased Accounts receivable Accounts payable Promotion expense Sales revenue Net expense from the goods purchased Accounts receivable Accounts payable Promotion expense Other income Other income Interest income Accounts payable Net expense from the goods purchased Other receivables Other income Other income Sales revenue Purchases for the period Accounts receivable Accounts payable Purchases of fixed asset Other receivables Sales revenue Purchases for the period Accounts receivable Accounts payable Sales of fixed asset Sales revenue Purchases for the period Accounts receivable Accounts payable Other receivables Sales of fixed asset Sales revenue Purchases for the period Accounts	2,272 174 434 83,291 110 26,825 34 33,086 2,166 4,333 4,556 1,379,153 2,164 383,959 3,435 53,669 10,140,753 30,353 1,060,674 1 103 44 1,306 40,597 39,403 160 325 198 10,115,863 2,328,977 1,258,218 760,781 208,128 53,066 4,624 8,543 1,038 5,783 68 16,887 377,560 13,793 37,829 2,763 4,347 25,515 959 10,032	Same as general transactions " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Same as general transactions " " " " " " " " " " " " "	0.01% -% -% 0.39% -% 0.10% -% 0.15% 0.01% 0.02% 0.02% 6.45% 0.01% 1.45% -% 0.25% 47.40% 0.11% 4.01% -% -% -% -% 0.15% 0.18% -% -% -% 47.29% 11.86% 4.76% 2.88% 0.79% 0.20% 0.02% 0.04% -% 0.02% -% 0.08% 1.76% 0.05% 0.14% 0.01% 0.02% 0.12% -% 0.04%

201

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3	" " " " " " " " " " " " " " " " " " " " " " " " " " Lotes Suzhou Co., Ltd. " " " " " Lotes Suzhou Co., Ltd. " " " " " " " " " " REKA Technology Co., Ltd. " " " " " " " " "	" " " Shenzhen DeYi Automation Equipment Co., Ltd. " " " " " " Lintes Technology (Suzhou) Co., Ltd. " Lotes Zhongshan Co., Ltd. " " " " " " " Guangzhou Leside Technology Co., Ltd. " Zhongshan Dezhi Metal Surface Treatment Co., Ltd. " " " Xincheng Development Co., Ltd. " " " Zongka Technology (Shenzhen) Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd. " " " Shenzhen DeYi Automation Equipment Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " " Xincheng Development Co., Ltd. " " " Zongka Technology (Shenzhen) Co., Ltd. " " Good Hope Investments Limited Ememe Robot Co., Ltd. Lotes Hengnan Co., Ltd.	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	receivable Administration expense Other income Sales of fixed asset Sales revenue Purchases for the period Accounts receivable Accounts payable Other income Other receivables Sales of fixed asset Sales revenue Accounts receivable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales of fixed asset Purchases of fixed asset Other receivables Other payables Sales revenue Accounts receivable Purchases for the period Accounts payable Sales of fixed asset Other receivables Sales revenue Purchases for the period Accounts receivable Accounts payable Sales revenue Accounts receivable Sales revenue Accounts receivable Other income Other receivables Sales revenue Purchases for the period Accounts receivable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales revenue Purchases for the period Other payables Other payables Accounts receivable Sales revenue	1,152 180 56 30,860 848 19,606 3 135 19 17 36,920 4,842 39,245 118,523 38,716 54,089 182,236 2,597 647,560 3,302 9 1 191,278 36,443 533 1 1,436,269 4,822 404,902 2,384 35,826 7,942 8,044 2,310 18,201 6,475 98,469 21 22,249 2,265 1,426 2,347 1,042 265 55,593 220 21,286 30,321 7,103 6,283 855,894 7,581 450,692	" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Same as general transactions " " " " " " " " " " " " " " " " " " " "	-% -% -% 0.14% -% 0.07% -% -% -% -% 0.17% 0.02% 0.18% 0.55% 0.15% 0.20% 0.69% 0.01% 2.45% 0.01% -% -% 0.89% 0.14% -% -% 6.71% 0.02% 1.53% 0.01% 0.17% 0.03% 0.04% 0.01% 0.09% 0.02% 0.46% -% 0.08% 0.01% -% 0.01% -% -% 0.26% -% 0.08% 0.14% 0.03% 0.02% 3.24% 0.03% 2.11%

202

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 5 5 5 6 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 8 8 9 9	" " " " " " " " " " " " " " " " Lotes Hengnan Co., Ltd. " " " " " " " " " Lintes Technology (Suzhou) Co., Ltd. " " Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. " " " " " " Lotes Zhongshan Co., Ltd. " " " " " " " " " " " Guangzhou Leside Technology Co., Ltd. "	" " " Shenzhen DeYi Automation Equipment Co., Ltd. " Lotes Zhongshan Co., Ltd. " " " " Guangzhou Leside Technology Co., Ltd. " Lotes Viet Nam Co., Ltd " " " Shenzhen DeYi Automation Equipment Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. " Lotes Suzhou Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " Lintes Technology Co., Ltd. " " Genie Precision Machine Co., Ltd. Lotes Zhongshan Co., Ltd. " " " " Guangzhou Leside Technology Co., Ltd. " " " Shenzhen DeYi Automation Equipment Co., Ltd. " " " " " Zhongshan Dezhi Metal Surface Treatment Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd. " Shenzhen DeYi Automation Equipment Co., Ltd. "	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Purchases for the period Accounts receivable Accounts payable Sales revenue Accounts receivable Sales revenue Purchases for the period Accounts payable Other receivables Other payables Sales revenue Accounts receivable Sales revenue Accounts receivable Purchases for the period Accounts payable Sales revenue Accounts receivable Sales revenue Accounts receivable Sales revenue Accounts receivable Purchases of fixed asset Sales revenue Accounts receivable Purchases of fixed asset Sales revenue Accounts receivable Accounts payable Operating expense Sales revenue Purchases for the period Accounts payable Administration expense Other payables Purchases for the period Accounts payable Sales revenue Accounts receivable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales of fixed asset Other receivables Accounts payable Purchases for the period Sales revenue Accounts receivable Sales revenue Accounts receivable	667,963 103,230 76,311 23,318 223 10,054 2,555,583 392,990 161,474 11,230 1,143,684 570,213 4,584 45,914 226 223 371,002 147,002 158,660 75,925 5,027 2,386 4,434 43,282 17,836 8 1,841,200 342,051 11,749 206 36 502 16 136 144 828,419 380,925 81,389 33,729 11,929 543 7,372 293 16 18 10,418 76,398 35,066 33,958 365,906 144,442	" " " " " " " " " " " " " " " " " " " " " " " " " " " " " Same as general transactions " " " " " " " " " " " " " " " " " " " " "	3.12% 0.39% 0.29% 0.11% -% 0.05% 11.95% 1.49% 0.61% 0.04% 5.35% 2.16% 0.02% 0.17% -% -% 1.73% 0.56% 0.74% 0.29% 0.02% 0.01% 0.02% 0.20% 0.07% -% 8.61% 1.29% 0.04% -% -% -% -% -% -% 3.87% 1.44% 0.38% 0.13% 0.06% -% 0.03% -% -% -% 0.04% 0.36% 0.16% 0.13% 1.71% 0.55%

203

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

9 9	" "	Chongqing Fuxinrui Electronic Technology Co., Ltd. "	1 1	Sales revenue Accounts receivable	939 1,013	" "	-% -%

Note 1: The number should be filled in as follows:

1. 0 refer to parent company

2. Subsidiaries are numbered by company, starting with the Arabic numeral 1. Note 2: The type of relationship with the counterparty is indicated below:

3. Parent company to subsidiaries

4. Subsidiaries to parent company

5. Subsidiaries to subsidiaries

204

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(2) Information on Reinvestment Business:

Information on the Company’s investees in 2021 was as follows (excluding investees in China):

China):	China):	China):	China):
				Unit: NT$1,000
Name of the company investing	Name of investee company	Location	Main business	Initial investment amount (Note 1)		Shares held at the end of the fiscal period			Maximum shareholding or capitalization in the period	Gain/loss of investee company in the fiscal period	Gain/loss in the investment recognized in the fiscal period	Remarks
				End of this period	End of the previous year	Shares	Percentage	Book value
The Company " " " " " " " The Company " Lotes Investment Ltd. Good Hope Investments Limited " Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co. " " " Lintes Technology Co., Ltd.	Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co. Lotes USA, Inc. LOTES EU GmbH Lerain Technology Co., Ltd. Mikronpoint Co., Ltd. Lotes Viet Nam CO., Ltd. Loteson International Investments Limited Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Wangden Investments Limited Ememe Robot Co., Ltd. Compertum Microsystems Inc. Good News Medical Co., Ltd. Lintes Technology Co., Ltd. Jiajun Investment Co., Ltd.	Samoa " " Anguilla Taiwan America Germany Taiwan Taiwan Vietnam Hong Kong Samoa Hong Kong " " Taiwan " " " "	Holding and investment " " " General investment Market development Market development Chip design, testing and sales Manufacture and sale of machinery and electronic components Manufacture of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Sales of connectors for the information industry, communications industry, and consumer electronics industry Sales of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Holding and reinvestment Manufacture of electrical and audio-visual electronic products Manufacture of electronic components Manufacture and sale of machinery and equipment, electronic parts and components, and optical instruments Manufacture of electronic parts and components, other electrical and electronic machinery and equipment General investment	721,064 11,107 554,055 13,840 690,000 69,200 3,132 47,321 25,000 497,825 721,064 2,768 2,803 554,064 13,840 69,600 43,880 6,360 486,926 -	741,904 11,428 570,068 14,240 690,000 71,200 3,502 9,385 5,000 - 741,904 2,848 2,884 570,077 14,240 69,600 43,880 250 486,926 15,000	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 4,732,059 2,500,000 17,985,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 2,632,800 636,000 29,712,788 -	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 16.40% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 31.25% 25.44% 52.13% -%	6,513,504 1,575,778 2,656,135 159,758 1,112,641 75,270 3,674 37,790 19,312 470,627 6,741,273 1,300 718,561 2,684,343 159,758 (8,099) 18,210 5,100 882,867 -	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 33.92% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 35.34% 25.44% 52.13% 100.00%	1,393,504 82,839 453,193 38,981 70,861 (3,360) (219) (29,164) (5,624) (26,387) 1,393,504 (278) 83,117 435,193 38,981 (341) (39,628) (3,774) 174,032 (13)	1,331,683 82,839 426,750 38,981 69,007 (3,360) (219) (8,412) (5,624) (26,387) 1,393,504 (278) 83,117 435,193 38,981 (322) (13,766) (673) 90,719 (13)	Note 2 Note 2 Note 2 Note 2

205

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

" " " " Jilong Co., Ltd.	Genie Precision Machine Co., Ltd. Compertum Microsystems Inc. Lerain Technology Co., Ltd. Jilong Co., Ltd. Rihui Co., Ltd.	" " " Samoa "	Manufacture and sale of optical molds Manufacture of electronic components Chip design, testing and sales Holding and reinvestment Holding and reinvestment	164,833 14,620 5,471 137,016 137,016	164,833 14,620 - 140,976 140,976	14,671,000 877,200 547,059 4,950,000 4,950,000	60.00% 10.41% 1.90% 100.00% 100.00%	204,091 6,067 4,546 261,176 261,176	60.00% 11.77% 3.10% 100.00% 100.00%	29,024 (39,628) (29,164) 30,332 30,332	16,556 (4,587) 149 1,147 1,147	Note 2 Note 2

Note 1: The original investment amount was converted into New Taiwan dollars using the exchange rate at the balance sheet date.

Note 2: Investment income recognized in the current period includes adjustments for unrealized gains or losses on intercompany transactions.

206

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

• (3) Investment in Chinese Company:

• Names of investee companies in Mainland China, major business activities, and other related information:

Unit: NT$ 1,000

Name of investee company in Mainland China	Main business	Paid-in capital (Note 3)	Method of investme nt (Note 1)	Accumulated investment amount remitted from Taiwan at the beginning of the fiscal period (Note 3)	Remitted	Recovered	Accumulated investment amount remitted from Taiwan at the end of the fiscal period (Note 3)	Gain/loss of investee company in the fiscal period	Shareholdin g ratio	Maximum shareholding or capitalization in the period	Gain/loss in investment recognized in the fiscal period (Note 2)	Carrying amount of investment at the end of the fiscal period	Investment income remitted back to Taiwan by the end of the fiscal period
Lotes Guangzhou Co., Ltd. Lotes Suzhou Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes HengNan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lotes Zhongshan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Zhongshan Jinmeida Metal Surface Treatment Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd.	Manufacture of connectors for the information industry, communications industry, and consumer electronics industry Manufacture of connectors for the information industry, communications industry, and consumer electronics industry Research and development of electronic products, plastic materials and products, and import and export business Manufacture of connectors for the information industry, communications industry, and consumer electronics industry Development and production of optical communication measurement instruments, optical transceivers with speed of 10GB/S and above, and provision of technical services for the above products Production of industrial robots, automation equipment and parts Manufacture of connectors for the information industry, communications industry, and consumer electronics industry, and production of industrial robots, automation equipment, and parts thereof Surface treatment for all kinds of hardware and plastic products Real estate development, housing rental, landscape design and interior decoration Surface treatment for all kinds of hardware and plastic products Research and experiment and development Development and sale of electronic components, automotive parts and accessories, computers and accessories, mold development, and import and export ofgoods and technology	739,056 553,302 13,840 962,883 137,016 108,678 1,869,253 265,173 99,983 29,473 20,431 6,955	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3) (3)	705,840 553,302 13,840 - 137,016 - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -	705,840 553,302 13,840 - 137,016 - - - - - - -	1,393,504 435,193 38,981 73,689 41,915 23,623 237,472 (539) (54) (962) 39,577 (1,555)	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	1,331,683 426,750 38,981 91,432 6,636 23,623 234,472 (539) (575) 889 39,577 (793)	6,513,462 2,656,082 159,758 1,288,404 161,083 134,271 2,155,532 249,292 98,249 96,050 57,105 1,448	- - - - - - - - - - - -

Note 1: There are six types of investments:

• (1) Investment in Chinese Corporation via Third Region Remittance.

• (2) Establishment of a company to reinvest in a continental company through a third regional investment.

• (3) Reinvest in Chinese companies by re-investing in existing companies in third regions.

• (4) Direct Investment

• (5) Others.

• (6) NA.

• Note 2: The investment gain or loss recognized in the current period has been reconciled with the unrealized gain or loss from intercompany transactions.

• Note 3: The balance sheet date exchange rates are used to translate the paid-in capital and remittance of cumulative investment amounts into New Taiwan dollars.

• Investment ceiling in Mainland China:

	Name	Accumulated amount remitted from Taiwan at the end of the fiscal period for investment in Mainland China (Note 1)	Investment amount approved by Investment Commission, MoEA (Note 1)	Investment ceiling in Mainland China according to the regulations made by Investment Commission, MoEA

207

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

Lotes Co., Ltd.	NT$1,272,982 thousand	NT$1,415,013 thousand	NT$10,117,489 thousand
Lintes Technology Co., Ltd.	NT$137,016 thousand	NT$137,016 thousand	NT$1,016,197 thousand

Note 1: The conversions to NTD were made at the exchange rates prevailing on the balance sheet date. 3. Significant transactions with the investee companies in Mainland China:

Please refer to the “major transaction details” and “business relationship and significant transactions between the Company and its subsidiaries” for details of the significant transactions between the Company and its investee companies in Mainland China, directly or indirectly, for year 2021.

(4) Information on Major Shareholders:

ation on Major Shareholders:
Shares Major Shareholders	Number of shares held	Shareholding ratio
JinlingInvestment Co.,Ltd.	10,956,237	10.32%
Jiaming Investment Co., Ltd.	9,797,037	9.23%
2nd discretionary entrustment to investment account of Fuh HwaInvestmentforNewLabor Pension Fund2018	7,530,222	7.09%

Note: (1) This table summarizes the principal shareholders’ information for the Company, based on the last business day of each calendar quarter, for the common and preferred shares of the Company for which the stockholders hold at least 5% of the Company’s outstanding common shares and treasury shares. The difference between the number of shares recorded in the financial statements and the number of shares for which the Company has completed the dematerialized shares may be due to differences in the basis of calculation.

• (2) If the above information is related to a shareholder’s share held in a trust, it is disclosed in the client’s separate account of the trustee’s trust account. For shareholders who apply for declaration of internal shareholdings of more than 10% according to the Securities and Exchange Act, their shareholdings include their own shares plus shares held by them in the trust and have the right to decide on the use of trust property; please refer to Market Observation Post System for more information on the declaration of internal shareholdings.

XIV. Segmental Information

(1) General information

The Company’s main business is the trading of various hardware and tool parts, the manufacturing, processing and trading of various terminals and their finished connectors, the import and export trade of the preceding items, and the agency of the preceding items related to domestic and foreign manufacturers’ products in the tender quotation and distribution business.

(2) Information on reportable segment profit or loss, assets, liabilities and their measurement basis and reconciliation

The Consolidated Company’s major decisions are based on the performance appraisal and resource allocation by the production regions. After analysis, the two regions meet the conditions of consolidation into a single operating segment, therefore the Consolidated Company as a whole is a single operating segment, and the information of segment profit or loss, segment assets and segment liabilities are consistent with the financial statements.

(3) Product and labor provision information

The Consolidated Company’s revenue information from external customers is as follows:

Product and labor name	2021 $ 5,715,874 5,643,188 3,195,511 2,991,448 2,162,309 310,135 1,373,452	2020
Server DT NB Strategic Projects LINTES(High Speed Cable) Automotive Other Total		4,371,102 4,740,378 2,779,981 2,384,341 2,131,004 119,130 765,396
	$ 21,391,917	17,291,332

208

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Subsidiaries

(4) Geographical information

The geographical information of the Consolidated Company is as follows, where revenues are categorized based on the geographical location of customers and non-current assets are categorized based on the geographical location of assets.

the geographical location of assets.
Area Revenue from external customers: Taiwan Mainland China Other Total Non-current assets Taiwan Mainland China Other Total	2021 $ 2,370,643 16,171,822 2,849,452	2020 1,155,725 13,867,897 2,267,710
	$ 21,391,917	17,291,332
	$ 1,011,079 7,842,858 420,677	776,383 5,258,620 46,069
	$ 9,274,614	6,081,072

Non-current assets include property, plant and equipment, right-of-use assets, investment property, intangible assets and other assets, but exclude financial instruments, deferred tax assets, and assets for retirement benefits.

209

VII. Review Analysis of Financial Position and Operating Performance and Risk Issues

1. Financial position

Unit: NT$ thousand

Item	Year	2020	2021	Difference Amount	Difference Amount	%
Current assets		13,054,559	16,959,937	3,905,378		29.91%
Property, plant and equipment		4,495,974	6,882,186	2,386,212		53.07%
Intangible assets		155,510	205,584	50,074		32.20%
Other assets		661,820	822,486	160,666		24.28%
Total assets		19,282,895	26,419,391	7,136,496		37.01%
Current liabilities		4,580,880	7,004,306	2,423,426		34.60%
Non-current liabilities		222,456	1,360,381	1,137,925		511.53%
Total liabilities		4,803,336	8,364,687	3,561,351		74.14%
Share capital		1,034,779	1,059,779	25,000		2.42%－
Capital reserves		3,958,247	5,283,698	1,325,451		33.49%
Retained earnings		9,101,114	11,200,170	2,099,056		23.06%
Other equity		(594,972)	(682,333)	(87,361)		(14.68%)
Equity to the parent company		13,499,198	16,862,481	3,363,283		24.91%
Non-control equity		980,361	1,192,223	211,862		21.61%
Total of equity		14,479,559	18,054,704	3,575,145		24.69%

Main causes and effects of changes of more than 20% and amounting to NT$10 million:

1.Current assets: This is mainly due to the significant increase in accounts receivable and inventory in response to the increase in scale of operations

2.Property, plant and equipment: The property, plant and equipment was added mainly for the expansion of the scale of operations.

3.Intangible assets: The increase in intangible assets was mainly due to SAP ERP import coaching fees. 4.Total assets: mainly due to the increase in current assets and fixed assets as a result of the expansion of operations.

5.Other assets: The increase in other assets was mainly due to the increase in prepayments for equipment due to the expansion of operations of our mainland subsidiary.

6.Current liabilities: The increase in current liabilities was mainly due to the increase in short-term borrowings as a result of the continued growth in scale of operations.

7.Non-current liabilities: This is due to the provision of lease liabilities in accordance with the IFRS 16 designation.

8.Total liabilities: mainly due to the increase in short-term borrowings as a result of the continued growth in scale of operations and the processing of convertible bonds.

9.Capital surplus: mainly due to the issuance of a cash capital increase at a premium in 2021 。

10.Retained earnings: The increase in net income was mainly due to the growth in profitability.

11.Total equity attributable to owners of the parent company; mainly due to the growth in profitability and increase in net profit for the period, as well as the issuance of new shares in a negotiated cash capital increase. 12.Non-controlling interests: The increase in non-controlling interests is mainly due to the increase in profits and asset size of the reinvested companies.

13.Total equity: mainly due to the increase in profitability and asset size of the Company.

210

2. Operating performance

(1) Comparative analysis table of operating performance

Unit: NT$ thousand

Year			Difference	Difference
	2020	2021
Item			Amount	%
Net operating revenue	17,921,332	21,391,917	3,470,585	19.37%
Operating cost	10,361,137	12,834,611	2,473,474	23.87%
Gross profit	6,930,195	8,557,306	1,627,111	23.48%
Operating expense	3,222,543	4,198,039	975,496	30.27%
Operating profit	3,707,652	4,359,267	651,615	17.57%
Non-operating income/expenses	37,650	180,931	143,281	380.56%
Net income before tax for continuing operations	3,670,002	4,540,198	870,196	23.71%
Income tax (expense) benefit	-834,413	-1,021,167	-186,754	22.38%
Net profit for the period	2,835,589	3,519,031	683,442	24.10%
Other comprehensive income	42,903	-84,179	-127,082	-296.21%
Total comprehensive income	2,878,502	3,434,852	556,350	19.33%
Net income attributed to owners ofthe parent company	2,732,361	3,472,201	739,840	27.08%
Net income attributed to non-controlling interest	103,228	46,830	-56,398	-54.63%
EPS	26.41	33.32	6.91	26.16%

Main causes and effects of changes of more than 20% and amounting to NT$10 million: 1.Operating costs: The increase in operating costs was mainly due to the increase in scale of operations in 2021 and the increase in raw material costs.

2.Gross profit: The increase in gross profit was mainly due to the increase in operating scale and improvement in manufacturing process in 2021.

3.Operating expenses: Mainly due to the increase in scale of operations and related expenses, as well as frequent research and development activities and salary adjustments for employees in Mainland China, the overall expenses increased significantly.

4.Operating profit: The increase in operating profit was mainly due to the increase in the scale of operations in 2021, which was higher than the increase in operating expenses, resulting in a significant increase in operating profit.

5.Non-operating income/expenses: This was mainly due to a significant increase in foreign exchange losses in 2021, resulting in a significant increase in non-operating income and expenses.

6.Net income before tax for continuing operations: This was mainly due to the increase in the scale of operations in 2021, which resulted in a significant increase in net income before tax.

7.Income tax (expense) benefit: This was mainly due to the increase in the scale of operations in 2021, which resulted in a significant increase in profitability and a relative increase in the provision for income tax.

8.Net profit for the period: This was mainly due to the increase in the scale of operations in 2021, which resulted in a significant increase in net profit for the period.

9.Total comprehensive income for the period: The increase in total comprehensive income for the period was mainly due to the increase in the scale of operations and the significant increase in profitability in 2020.

10.Net income attributed to owners of the parent company: The increase in net income attributed to owners of the parent company was mainly due to the increase in the scale of operations in 2021 and the significant increase in profitability.

11.Net income attributed to non-controlling interest: The Company's equity-method investee, Lintes Technology Co., Ltd. for 2020, has just made up for its loss and is not yet subject to income tax. However, while pretax earnings in 2021 were comparable to 2020, the decline in earnings after tax resulted in a decrease in earnings from non-controlling interests in minority interests.

12.EPS: The increase in EPS was mainly due to the increase in the scale of operations in 2021 and the significant increase in profitability.

211

3. Cash flow

• (1) Analysis of changes in cash flows for the most recent years

of changes in cash flows for the	most recentyears
Year
			Increase (decrease)
Item	2020	2021	proportion %
Cash Flow Ratios	75.72	38.40	-49.29%
Cash flow fair value ratios	95.50	75.53	-20.91%
Cash reinvestment ratio	14.16	5.89	-58.40%

• (1) Cash flow ratio (%): The decrease in cash flow ratio in 2021 was mainly due to the decrease in cash flow from operating activities and the significant increase in current liabilities.

• (2) Cash flow adequacy ratio (%): The decrease in cash flow adequacy ratio in 2021 was mainly due to the decrease in cash flow from operating activities and the significant increase in capital expenditure on property and plant.

• (3) Cash flow reinvestment ratio (%): Mainly due to the decline in cash flow fair ratio in 2021, which was mainly due to the decrease in cash flow from operating activities and the significant increase in capital expenditure on property and plant.

(2) Liquidity improvement plan:

The Company had a net cash inflow from operating activities in 2021 and therefore did not have a liquidity deficit that affected operating activities.

• (3) Analysis of changes in cash flows in the coming year.

The Company's operating scale and profitability have grown steadily and is expected to maintain a steady net cash inflow from operating activities in the coming year. The Company will adjust its production and sales operations in response to the global economic situation, and take into account the future trend of product development to replace old equipment with new equipment, and expects that capital expenditures and working capital requirements will be met by its own funds; if there is still a need for funds, the Company will take into account market conditions and the cost of raising funds to effectively cover the need by borrowing from existing banks and raising funds through equity issuance.

1. The impact of major capital expenditures in the most recent year on financial operations: None.

2. The main reasons for the most recent annual reinvestment policy and profit or loss, improvement plans and investment plans for the coming year:

Unit: NT$ thousands

Name of Investing Company	Investing amount as of 2021/12/31	Investing policy	Investment income recognized during the period	Main reasons for gain or loss	Improve ment plans	Other investment plans for the future
Lotes Investment Ltd	721,064	Investment Company	1,331,683	Deepening and Expanding Markets by investing	-	-
JIA WANG Investment INC.	11,107	Investment	82,839	Deepening and Expanding Markets by investing	-	-
Guan Si Development INC.	554,055	Investment	426,750	Deepening and Expanding Markets by investing	-	-
JA XI Investment INC.	13,840	Investment	38,981	Deepening and Expanding Markets by investing	-	-
JIA YU Investment INC.	690,000	Investment	69,007	Deepening and Expanding Markets by investing	-	-
LOTES USA ,Inc	69,200	Business Maintenance and Development	(3,360)	Maintain customer relationships	-	-
LOTES EU Gmbh	3,132	Business Maintenance and Development	(219)	Maintain customer relationships
Lerain Technology Co., Ltd.	47,321	IC design, testing and sales	(8,412)	Still in its early stage of establishment, the operational benefits are not yet visible
Mikronpoint Co., Ltd.	5,000	Manufacture and sale of machinery and electronic components	(5,624)	Still in its early stage of establishment, the operational benefits are not yet visible
LOTES Viet Nam Co,Ltd	497,825	Connector manufacturing for the information industry, communications industry and consumer electronics industry	(26,387)	Still in its early stage of establishment, the operational benefits are not yet visible

212

1. Analyze and assess the following risks for the most recent year and up to the date of publication of the annual report:

2. (1) Effect of interest rates, exchange rate changes, inflation on the Company's profit or loss and future response measures:

3. 1) Effect of interest rate changes on the Company's profit or loss and future response measures

   • Changes in the Company's interest income and expenditure for the last two years

Unit: NT$ thousands

			Unit: NT$ thousands	Unit: NT$ thousands
Item	2020		2021
	Amount	%	Amount	%
Operatingrevenue	17,291,332	100.00%	21,391,917	100.00%
Operating profit	3,707,652	21.44%	4,359,267	21.47%
Interest	10,180	0.06%	(14,310)	(0.07%)

The Company's interest income (expense) as a percentage of operating revenue and operating profit was insignificant and had no significant impact on profit or loss.

• Future response measures

• The Company has exclusive personnel to observe the fluctuation of the exchange rate from time to time, and intends to consider the effect of exchange rate changes when quoting prices; and to appropriately retain the foreign currency portion of sales revenue to meet the foreign currency purchase expenses in order to achieve the automatic hedging function.

• The Company will adopt hedging strategies for derivative financial instruments, such as pre-sale or pre-purchase of forward exchange, in order to hedge the related exchange rate risk in order to minimize the impact of exchange rate changes on the Company's profit or loss, depending on the changes in the currency exchange market and currency exchange funds requirements.

• (3)The effect of inflation on the Company's profit or loss for the most recent year and up to the date of publication of the Company's prospectus and future response measure:

The Company is always aware of market price fluctuations to determine its purchasing policies and maintains good interaction with its suppliers and customers, therefore there are no events that have a significant impact on inflation.

(2) Policies, principal reasons for gains or losses from engaging in high-risk, leveraged investing, lending of funds to others, endorsement guarantees and derivative transactions and future response measures: As of the end of 2021, the Company had loaned $0 thousand to others.

The Company recorded $910,040 thousand of guarantees for others at the end of 2021, which was to endorse bank loans for the working capital needs of its subsidiaries. The related loans and guarantees were performed in accordance with the "Control over Loans and Endorsements of Funds" established by the Company.

• (3) Future R&D plans and estimated R&D costs:

Our future product development and design direction: board-to-board connectors will be designed for high-frequency high speed, small pitch, low height, SMT design volume minimization; I/O connectors will be designed for interface connectors Fine Pitch, thin design and high-frequency high speed; memory card connectors will be designed for integration of multi-card all-in-one design, enhance battery connector volume minimization and custom design; wireless network connectors with wireless network product development and design, computer peripheral connectors for consumer electronics (HDMI DVI phones), automotive, server, medical and communication connectors will also be the development focus.

In the coming year, the Company will not only continue to increase the investment in R&D expenses, but will also continue to improve the production efficiency with the accumulated R&D results in the long term in order to gain a competitive advantage in the market; in 2021, the Group's R&D expenses are expected to be approximately NT$2,000,000 thousand, which is expected to account for 8% of the current year's operating revenue.

• (4) Effect of significant domestic and international policy and legal changes on the Company's financial operations and response measures:

The Company is always aware of important policy and legal changes in domestic and foreign countries, and takes the initiative to take appropriate measures in a timely manner. In recent years, the Company has not been subject to significant policy and legal changes both domestically and internationally that have materially affected its financial operations.

(5) Effect of technological and industrial changes on the Company's financial operations and response measures:

The Company has always been committed to technology research and development to improve yield and continues to innovate high value-added connector products, therefore, technology changes have a positive effect on the Company's financial business and the Company will continue to maintain its leading position in R&D and technology.

(6) Effect of corporate image changes on corporate risk management and response measures:

The Company adheres to the business philosophy of "teamwork, enthusiasm, efficiency, innovation" and has a good corporate image, and became a listed company in 2007 which is expected to attract more outstanding talents to enter the company's service, strengthen the strength of the operating team, and then return the operating results to the shareholders and fulfill the corporate social responsibility. So far, no incidents that damage the corporate image have occurred.

• (7) Expected benefits and possible risks of mergers and acquisitions: None.

• (8) Expected benefits and possible risks of plant expansion: None.

• (9) Risk of concentration of imports or sales: None.

• (10) Effects or risks on the issue that large numbers of shares are transferred or replaced by directors, supervisors or major

213

shareholders holding more than 10% of company shares: None.

• (11) The effects and risks of changes in management on the Company: None.

• (12) In the event of litigation or non-litigation, the Company and its Directors, Supervisors, Presidents, substantially responsible persons, majority shareholders holding more than 10% of the shares and affiliated companies shall disclose the material litigation, non-litigation or administrative dispute that has been adjudicated or is still pending, the outcome of which may have a material impact on shareholders' interests or the price of securities, the facts in dispute, the amount of the subject matter, the date of commencement of the litigation, the principal parties involved and the disposition of the matter as of the date of publication of this annual report: None.

• (13) Other significant risks: None.

• Other important matters: None

214

VIII. Special Notes

1. Related information of affiliates

(1) Affiliates' organizational chart

==> picture [760 x 422] intentionally omitted <==

215

(2) Basic information of each affiliates:

Name of Company	Incorporating date	Address	Paid-in Capital	Major operations or production items
LOTES INVESTMENTS LIMITED	2003/9/5	Offshore Chambers, P.O. Box217, Apia, Samoa	721,064	Engaged in holding and reinvestment activities
Good Hope Investments Limited	2003/3/21	Offshore Chambers, P.O. Box217, Apia, Samoa	11,107	Engaged in holding and reinvestment activities
Guan Si Development Co, Ltd.	2003/11/18	Offshore Chambers, P.O. Box217, Apia, Samoa	554,055	Engaged in holding and reinvestment activities
Zha Xi Investments Ltd.	2005/12/22	P.O.BOX850, Offshore Incorporation Centre, The Valley, Anguilla, British West Indies	13,840	Engaged in holding and reinvestment activities
Jiayu Investment Co., Ltd.	2008/7/4	4F., No. 15, Wuxun St., Anle Dist., Keelung City	690,000	Engaged in holding and reinvestment activities
LOTES USA,INC.	2012/4/1	888SW Fifty Avenus, Suite 800,Portland, OR 97204 U.S.A	69,200	Market development
LOTES EU,GmbH	2018/2/27	Hessenring 119-121, 61348 Bad Homburg	3,132	Market development
LOTES VIETNAM COMPANY LIMITED	2021/4/23	Ngo Gia Kham street, Phuc Khanh Industrial Park, Phu Khanh Ward, Thai Binh cit, Thai Binh province, Viet Nam	497,825	Manufacturing of connectors for the information industry, communications industry and consumer electronics industry
LOTES INVESTMENT Ltd.	2007/10/15	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai, H.K	721,064	Engaged in holding and reinvestment activities
Lotes Guangzhou Co., Ltd.	1993/1/28	No. 526, Jinling North Road, Bantu Management Zone, Nansha Economic and Technological Development Zone, Guangzhou	739,056	Manufacturing of connectors for the information industry, communications industry and consumer electronics industry
Lotes Hengnan Co., Ltd.	2010/5/17	Yunji Avenue, New County Industrial Park, Henan County, Hengyang City, Hunan Province	962,883	Manufacturing and selling of connectors for the information industry, communications industry and consumer electronics industry
Shenzhen Deyi Automation Technology Co., Ltd.	2014/5/13	No. 522, Block C, Section D, Industrial Plant, Area 71, South Side of East Second Road, Xin'an Street, Bao'an District, Shenzhen City	108,678	Production of industrial robots, automation equipment and their components.
Lotes Zhongshan Co., Ltd.	2016/05/12	No.12, Jinhui Road, Triangle Town, Zhongshan City	1,869,25 3	R&D, production and management of electronic components and assemblies, calculator parts, molds, industrial robots, intelligent floor sweeping robots and components, intelligent industrial cameras; engaged in electronic, communication and automatic control technology R&D
Xin Cheng Ltd.	2003/10/16	Offshore Chambers, P.O. Box217, Apia, Samoa	2,768	Selling of connectors for the information industry, communications industry and consumer electronics industry
Rui Jia Trading Co.	2007/11/13	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai, H.K	2,803	Selling of connectors for the information industry, communications industry and consumer electronics industry
Jae You Co., Ltd.	2007/10/29	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai, H.K	554,064	Engaged in holding and reinvestment activities
Lotes Suzhou Co., Ltd.	2003/7/10	No.26, Caohu Avenue, Xiangcheng Economic Development Zone, Suzhou, Jiangsu Province	553,302	Manufacturing of connectors for the information industry, communications industry and consumer electronics industry
Wangden Investments Co., Ltd.(HK)	2007/10/12	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai, H.K	13,840	Engaged in holding and reinvestment activities
Tsongkha Technology (Shen Zhen) Co., Ltd.	2006/5/15	No. 528, Block C, Section D, Industrial Plant, Area 71, South Side of East Second Road, Xinan Street Office, Baoan District, Shenzhen City	13,840	Engaged in R&D of electronic products, plastic raw materials and their products, import and export business
Ememe Robot Co., Ltd.	2010/6/22	13F.-1, No. 716, Zhongzheng Rd., Zhonghe Dist., New Taipei City	69,600	Engaged in the manufacturing of electrical and audio-visual electronic products
Lintes Technology Co., Ltd.	2011/8/22	2F.-1, No. 268, Liancheng Rd., Zhonghe Dist., New Taipei City	486,926	Engaged in the manufacturing of electronic components, other electrical and electronic mechanical equipment
Jilong Co., Ltd.	2011/6/16	Offshore Chambers,P.O.Box 217 ,Apia ,Samoa	137,016	Engaged in holding and reinvestment activities
Sunmax Technology Co., Ltd.	2011/11/8	Offshore Chambers,P.O.Box 217 ,Apia ,Samoa	137,016	Engaged in holding and reinvestment activities
Lintes Technology (Suzhou) Co., Ltd.	2012/3/14	No.26, Caohu Avenue, Xiangcheng Economic Development Zone, Suzhou	137,016	Development and production of optical communication measuring instruments and optical transceivers with speeds of 10GB/S and above and

216

				technical services for the above products
Guangzhou Leside Technology Co., Ltd.	2015/2/27	Room 603, No.5, Shuang Shan Avenue, Nansha District, Guangzhou	20,431	Research and experimental development
Chongqing Fuxinrui Techmology Co., Ltd.	2018/12/27	No. 6, Yingchun Road, Nanan District, Chongqing City	6,955	Development and sale of electronic components, automotive parts and components, calculators and components, mold development and import and export of goods and technologies
Hengnan Deyi Property Development Co., Ltd.	2018/5/18	No. 120, Yunji Avenue, Yunji Town, Henan County, Hengyang City, Hunan Province	99,983	Property development, home rental, landscaping and interior decoration
Compertum Microsystems Inc.	2019/11/5	13F.-1, No. 716, Zhongzheng Rd., Zhonghe Dist., New Taipei City	84,250	Engaged in the manufacturing of electronic components
Zhongshan Dezhi Artificial Co., Ltd.	2016/3/24	1F., No.8, Ruifeng Road, Triangle Town, Zhongshan	130,944	Surface treatment for all kinds of hardware and plastic products
Zhongshan Jinmeida Metal Surface Treatment Co.	2002/7/11	1, No. 2, Ruifeng Road, Zhongshan City, Guangdong Province	29,473	Surface treatment for all kinds of hardware and plastic products
Lerain Technology Co., Ltd.	2020/1/2	13F-1, No.716, Zhongzheng Rd., Zhonghe Dist., New Taipei City	288,529	Chip design, testing and sales
Genie Precision Machining Co., Ltd.	1986/10/3	No.4 Alley 704, Heping Rd., Bade Dist., Taoyuan City, Taiwan R.O.C.	244,500	Engagement in optical mold manufacturing and trading
Good News Medical Co., Ltd.	2020/4/22	4F No.15 Wuhsun St., Anle Dist., Keelung City	5,000	Manufacture and sale of machinery and equipment, electronic parts and components, and optical instruments
Micropoint Co., Ltd.	2020/12/21	9F No. 87-5, Kuangming 6th Rd., Zhubei City, Hsinchu County	25,000	Manufacture and sale of machinery and equipment, electronic parts and components, and optical instruments

(3) Same shareholder information as those presumed to have a controlling and subordinate

relationship: None.

(4) Information on Directors, Supervisors and Presidents of affiliates

Unit: shares

Nature	Name of Company	Title	Name or representative	Shareholding	Shareholding
				Shares	Shareholding %
Controlling	Lotes Co., Ltd.	Chairperson	Jiaming Investment Ltd. Legal Representative: Chu, Te-Hsiang	9,797,037	9.23%
		Director	Jiaming Investment Ltd. Legal Representative: Ho, Te-Yu	9,797,037	9.23%
		Director	Hsieh, Chia-Ying	0	0
		Director	Chu, Chien-Chung	0	0
		Director	Wang, Jen-Chun	0	0
		Director	Chiang, I-Cheng	0	0
		Director	Wu, Chang-Hsiu	0	0
		President	Ho, Te-Yu	454,108	0.43
Subsidiary	LOTES INVESTMENTS LIMITED	Director	Lotes Co., Ltd. Legal Representative: Chu, Te-Hsiang, Ho, Te-Yu	26,050,000	100
	Good Hope Investments Limited	Director	Lotes Co., Ltd. Legal Representative: Chu, Te-Hsiang, Ho, Te-Yu	401,281	100
	Guan Si Development Co, Ltd.	Director	Lotes Co., Ltd. Legal Representative:Hsu, Li-Ping	20,016,426	100
	Zha Xi Investments Ltd.	Director	Lotes Co., Ltd.Legal Representative: Huang, Li-Yueh	500,000	100
	Jiayu Investment Co., Ltd.	Chairperson	Lotes Co., Ltd.Legal Representative: Chu, Te-Hsiang	69,000,000	100
		Director	Lotes Co., Ltd.Legal Representative: Ho, Te-Yu	69,000,000	100
		Director	Lotes Co., Ltd.Legal Representative: Ho, Kun-Shan	69,000,000	100
		Supervisor	Lotes Co., Ltd.Legal Representative: Ho, Jian-Sheng	69,000,000	100
	LOTES INVESTMENT Ltd.	Director	LOTES INVESTMENTS LIMITEDLegal Representative:	26,050,000	100

217

			Chu-Chen, Yi-Hui
	Lotes Guangzhou Co., Ltd.	Chairperson	LOTES INVESTMENT Ltd.Legal Representative: Ho, Te-Yu	26,700,000	100
		Director (Vice Chairperson)	LOTES INVESTMENT Ltd.Legal Representative: Chu, Te-Hsiang	26,700,000	100
		Director	LOTES INVESTMENT Ltd.Legal Representative: Chu-Chen, Yi-Hui	26,700,000	100
		Supervisor	LOTES INVESTMENT Ltd.Legal Representative: Ho, Kun-Shan	26,700,000	100
	Xin Cheng Ltd.	Director	Good Hope Investments Ltd. Legal Representative: Ho, Mei-Yu	100,000	100
	Rui Jia Trading Co.	Director	Good Hope Investments Ltd. Legal Representative: Bao, Yu-Yi	101,281	100
	Jae You Co., Ltd.	Director	Guan Si Development Co, Ltd.Legal Representative: Ho, Jian-Sheng	20,016,756	100
	Lotes Suzhou Co., Ltd.	Chairperson	Jae You Co., Ltd.Legal Representative: Chu, Te-Hsiang	19,989,221	100
		Director (Vice Chairperson)	Jae You Co., Ltd.Legal Representative: Ho, Te-Yu	19,989,221	100
		Director	Jae You Co., Ltd.Legal Representative: Kung, Yung-Sheng	19,989,221	100
		Supervisor	Jae You Co., Ltd.Legal Representative: Chen, Ya-Yuan	19,989,221	100
	Wangden Investments Co., Ltd.	Director	Zha Xi Investments Ltd.Legal Representative: Lin, Yi-Jun	500,000	100
	Tsongkha Technology (Shen Zhen) Co., Ltd.	Director	Wangden Investments Co., Ltd.Legal Representative: Wang, Ying-Ping, Ho, Te-Yu, Lin, Ko-Lun	500,000	100
	Lotes Hengnan Co., Ltd.	Director	Lotes Guangzhou Co., Ltd.Legal Representative: Ho, Te-Yu, Chen, Zhi-Yu, Lin, Ko-Lun	221,500,000	100
	Lotes Hengnan Co., Ltd.	Supervisor	Lotes Guangzhou Co., Ltd.Legal Representative: Lu, Chih-Cheng	221,500,000	100
	Shenzhen Deyi Automation Technology Co., Ltd.	Director	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Ying-Ping	25,000,000	100
	Shenzhen Deyi Automation Technology Co., Ltd.	Supervisor	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Hsi-Hung	25,000,000	100
	Ememe Robot Co., Ltd.	Chairperson	Jiayu Investment Co., Ltd.Legal Representative: Chu, Te-Hsiang	6,960,000	94.37
		Director	Jiayu Investment Co., Ltd.Legal Representative: Tsai, Hui-Wen	6,960,000	94.37
		Director	Jiayu Investment Co., Ltd.Legal Representative: Liu, Hsing-Hsia	6,960,000	94.37
		Supervisor	Hsu, Feng-Yu	0	0
	Lintes Technology Co., Ltd.	Chairperson	Jiayu Investment Co., Ltd.Legal Representative: Chu, Te-Hsiang	31,081,140	51.37
		Director	Jiayu Investment Co., Ltd.Legal Representative: Ho, Te-Yu	31,081,140	51.37
		Director	Jiayu Investment Co., Ltd.Legal Representative: Lo, Wei-Ren	31,081,140	51.37
		Director	Lai, Wei-Ru	0	-
		Director	Ye, Jing-Zhong	0	-
		Director	Ling, Ge	0	-
		Director	Yang, Zhi-Qing	0	-
	LOTES USA, INC	Director	Lotes Co., Ltd.Legal Representative: Wang, Ying-Lin	2,500,000	100
		Director	Lotes Co., Ltd.Legal Representative: Huang, Rui-Jin	2,500,000	100
		Director	Lotes Co., Ltd.Legal Representative: Lin, Yi-Jun	2,500,000	100
	LOTES EU,GmbH	Chairperson	Lotes Co., Ltd.Legal Representative: Chu, Te-Hsiang	100,000	100
		Director	Lotes Co., Ltd.Legal Representative: Tsai, Ming-Jui	100,000	100
		Director	Lotes Co., Ltd.Legal Representative: HSIEH, JIA-XIN	100,000	100
	Jilong Co., Ltd.	Director	Lintes Technology Legal Representative: Chen, Ya-Yuan	4,950,000	100
	Sunmax Technology Co., Ltd.	Director	Jilong Co., Ltd.Legal Representative: LIAO, HUI-YING	4,950,000	100
	Lintes Technology (Suzhou) Co., Ltd.	Chairperson	Sunmax Technology Co., Ltd.Legal Representative: Ho, Te-Yu	4,950,000	100
		Director and President	Sunmax Technology Co., Ltd.Legal Representative: Lo, Wei-Ren	4,950,000	100
		Director	Sunmax Technology Co., Ltd.Legal Representative: Chu, Te-Hsiang	4,950,000	100

218

		Supervisor	Sunmax Technology Co., Ltd.Legal Representative: Bao, Yu-Yi	4,950,000	100
	Lotes Zhongshan Co., Ltd.	Chairperson	Legal Representative: Ho, Te-Yu	11,500,000	100
		Director	Legal Representative: Chu-Chen, Yi-Hui	430,000,000	100
		Director	Legal Representative: Ho, Hung-YU	430,000,000	100
		Supervisor	Legal Representative: Lin, Ya-Chi	430,000,000	100
	Guangzhou Leside Technology Co., Ltd.	Chairperson	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Ying-Ju	4,700,000	100
		Supervisor	Lotes Guangzhou Co., Ltd.Legal Representative: Deng, Li-Ming	4,700,000	100
	Chongqing Fuxinrui Techmology Co., Ltd.	Chairperson	Guangzhou Leside Technology Co., Ltd.Legal Representative: He, Yong-Hong	816,000	51
		Director	Guangzhou Leside Technology Co., Ltd.Legal Representative: Deng, Li-Ming	816,000	51
		Supervisor	Guangzhou Leside Technology Co., Ltd.Legal Representative: WANG, HSUEH-LIANG	816,000	51
	Hengnan Deyi Property Development Co., Ltd.	Chairperson	Lotes Guangzhou Co., Ltd.Legal Representative: Ho, Te-Yu	23,000,000	100
		Supervisor	Lotes Guangzhou Co., Ltd.Legal Representative: Lu, Chih-Cheng	23,000,000	100
	Compertum Microsystems Inc.	Chairperson	Jiayu Investment Co., Ltd.Legal Representative: Chu, Te-Hsiang	2,632,800
		Director	Ho, Te-Yu	600,000
		Director	Lo, Wei-Ren	600,000
		Director	LIU, JIEN-CHAN	705,000
		Director	Man Francis Piu	705,000
		Supervisor	Hsu, Feng-Yu	0
	Zhongshan Dezhi Artificial Co., Ltd.	Director	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Ying-Ping	6,100,000	100
	Zhongshan Jinmeida Metal Surface Treatment Co.	Director	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Ying-Ping	22,300,000	100
	Lerain Technology Co., Ltd.	Director	Lotes Co., Ltd.Legal Representative: Chu, Te-Hsiang	4,732,059	16.40
		Director	Kao, Miao-Bin	4,607,941	15.97
			HO, CHU-YEN	2,237,692	7.75
			Chu, Pei-Hsuan	1,683,128	5.83
		Director	Hsu, Feng-Yu	5,000	0.01
		Supervisor	Chen, Ya-Yuan	402,000	1.39
	Karlum Investment Co., Ltd.	Director	Lintes Technology Co., Ltd.Legal Representative: Chu, Te-Hsiang	0
		Director	Lintes Technology Co., Ltd.Legal Representative: Lo, Wei-Ren	0
	Genie Precision Machining Co., Ltd.	Chairperson	Lintes Technology Co., Ltd.Legal Representative: Lo, Wei-Ren	14,671,000	60%
		Vice Chairperson	Lintes Technology Co., Ltd.Legal Representative: Chu, Te-Hsiang	14,671,000	60%
		Director	Lintes Technology Co., Ltd.Legal Representative: Wang, Tzu-Wei	14,671,000	60%
		Supervisor	Chu, Tzu-Chi	201,571	0.8%
	Good News Medical Co., Ltd.	Chairperson	Chu, Te-Hsiang	0
		Supervisor	Ho, Te-Yu	0
	Micropoint Co., Ltd.	Chairperson	Lotes Co., Ltd.Legal Representative: Chu, Te-Hsiang	2,500,000
		Director	Lotes Co., Ltd.Legal Representative: Ho, Te-Yu	2,500,000
		Director	Lotes Co., Ltd.Legal Representative: Chen, Ya-Yuan	2,500,000
		Supervisor	Lotes Co., Ltd.Legal Representative: Hsu, Feng-Yu	2,500,000
	LOTES VIET NAM COMPANY LIMITED	Chairperson	Lotes Co., Ltd.Legal Representative: Kung, Yung-Sheng	17,985,000	100

(4) Operating overview of affiliates

Unit: 1,000 TWD

	Name of Company	**Capital **	Total Assets	Liabilities	**Net Worth **	Operating Revenue	Operating (Loss) Gain	After tax (Loss) Gain	EPS
1	Lotes Guangzhou Co.,Ltd.	739,056	9,854,107	3,340,645	6,513,462	10,822,246	1,299,604	1,393,504	52.19
2	Lotes Suzhou Co.,Ltd.	553,302	2,874,381	218,298	2,656,082	1,754,957	382,775	435,193	21.77
3	GoodHopeInvestmentsLimited	11,107	1,575,778	0	1,575,778	0	0	82,839	206.44
4	LOTESINVESTMENT Ltd.	721,064	6,513,504	0	6,513,504	0	0	1,393,504	53.49

219

5	XinChengLtd.	2,768	408,585	407,286	1,300	1,441,091	(56)	(278)	(2.78)
6	GuanSi Development Co,Ltd.	554,055	2,656,133	0	2,656,133	0	0	435,193	21.74
7	ZhaXi InvestmentsLtd.	13,840	159,758	0	159,758	0	0	38,981	77.96
8	Tsongkha Technology (Shen Zhen) Co.,Ltd.	13,840	639,049	479,291	159,758	1,095,907	47,588	38,981	77.96
9	LOTESINVESTMENT Ltd.	721,064	6,741,273	0	6,741,273	0	0	1,393,504	53.49
10	Wangden Investments Co.,Ltd.	13,840	159,758	0	159,758	0	0	38,981	77.96
11	JaeYou Co.,Ltd.	554,064	2,684,343	0	2,684,343	0	0	435,193	21.74
12	RuiJiaTrading Co.	2,803	4,178,011	3,459,450	718,561	13,630,229	63,338	83,117	820.65
13	JiayuInvestment Co.,Ltd.	690,000	1,113,863	1,222	1,112,641	116,198	116,138	70,861	1.03
14	EmemeRobot Co.,Ltd.	73,750	2,200	10,781	(8,581)	0	(401)	(341)	(0.05)
15	LotesHengnanCo.,Ltd.	962,883	1,661,058	372,654	1,288,404	1,727,712	76,998	73,689	0.33
16	LintesTechnology Co.,Ltd.	570,000	2,550,786	857,124	1,693,662	2,112,950	202,328	174,032	3.05
17	Jilong Co.,Ltd.	137,016	261,176	0	261,176	0	(11,583)	30,332	6.13
18	Sunmax Technology Co.,Ltd.	137,016	307,542	46,367	261,176	0	(11,583)	30,332	6.13
19	Lintes Technology (Suzhou) Co., Ltd.	137,016	851,413	543,871	307,543	1,912,232	51,392	41,914	8.47
20	LOTES USA Inc.	69,200	77,521	2,251	75,270	0	(36,411)	(3,360)	(1.34)
21	Shenzhen Deyi Automation Technology Co.,Ltd.	108,678	480,253	345,982	134,271	925,845	32,902	23,623	0.94
22	LotesZhongshanCo.,Ltd.	1,869,253	3,798,471	1,642,939	2,155,532	2,831,317	323,351	237,472	0.55

220

(6) Consolidated financial statements of affiliates: Declaration

For the fiscal year 2021 (January 1, 2021 through December 31, 2021), the companies that should be included in the preparation of the consolidated financial statements of affiliated enterprises in accordance with the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" are the same companies that should be included in the preparation of the consolidated financial statements of their parent and subsidiaries in accordance with IAS 10 approved by the Financial Supervisory Commission, and the information that should be disclosed in the consolidated financial statements of affiliated enterprises has been disclosed in the consolidated financial statements of the parent and subsidiaries previously disclosed, the Company hereby does not prepare separate consolidated financial statements of affiliated enterprises.

Company Name: Lotes Co., Ltd.

Chairperson: Chu, Te-Hsiang Date: March 21, 2022

(7) Affiliates Report: None.

2. Private placements of marketable securities as of the date of publication of the most recent year and as of the date of the annual report: None.

3. Shareholdings or dispositions of the Company's shares by subsidiaries for the most recent year and as of the date of the annual report: None.

4. Other necessary additions: None.

1. For the most recent year and as of the date of the annual report, if any event occurred that had a significant impact on shareholders' equity or the price of securities as defined in Clause 2, Paragraph 3, Article 36, of the Securities and Exchange Act: None

221

Lotes Co., Ltd.

Chairperson: Chu, Te-Hsiang

President: Ho, Te-Yu

222